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No Room for Resurgence: Third Quarter Fractional Market Recap

No Room for Resurgence: Third Quarter Fractional Market Recap
October 4, 2022
Dylan Dittrich

After getting absolutely blown out of the water in the second quarter, fractional investors were hoping for a better outcome in Q3, and they got it...I guess. In fact, until September, the Altan Insights 100 was actually up for the quarter. But just as the rally ran out of steam in traditional financial markets, with reason for economic optimism becoming increasingly scarce, fractional markets also relinquished positive momentum.

Through two months, the third quarter looked poised to mark increasing stability after the spring's precipitous drops. Alas, here we sit, with market activity outside of fractional still not sending signals that the negative trend is set to reverse in short order. That's not necessarily a situation exclusive to collectible asset classes; correlations are high, as most assets seem to be prisoners to inflation prints, economic indicators, and the Fed's response to them. In most collectible categories, though, we are approaching a moment when we will have retraced the majority of collectible boom gains in recent years. Whether those levels provide any resistance against unrelenting declines remains to be seen.

The news wasn't all bad fractionally in the third quarter. Video Games, Comic Books, Art, and Wine & Spirits delivered strong results, though there are some caveats. The Video Game and Art indices (the latter does not yet include Masterworks) were benefitted by the start of trading for Otis assets that migrated to Public, which explains the strong September returns. Comic Books and Wine & Spirits performance, though, is representative of broader activity in the categories, particularly in the case of the latter.

On the flip side, NFTs and Trading Cards continued to be battered, despite being thoroughly battered through the first half of the year. Interestingly, the continued NFT struggles came against the backdrop of an environment that saw ETH actually increase in value by 24% in Q3. Many floor prices declined mildly in ETH terms but were stable to slightly up in USD terms. Given the extent of damage, capitulation on the part of fractional investors is understandable.

Sports assets continued to suffer in the third quarter - the skid for many fractionally-represented cards persists, and the results in Sports Memorabilia seem to be a matter of broader sentiment than asset-specific weakness with auction results remaining strong.

Year-to-date, there are no surprises to report. Largely, the third quarter was more of the same, and where it wasn't, it wasn't enough to significantly erode the trends in place the rest of the year. Whether you consult the market cap-weighted indices or the average YTD ROI (a more equal-weighted measure) in each category, the story remains similar.

The breadth of positive performance weakened further in September. At the end of August, approximately 22% of all assets were trading positively in 2022. At the end of September, that figure had shrunk to just under 19%.

Further nodding at the breadth of market challenges is the performance of an equal-weighted index relative to the Altan Insights 100, which is market cap weighted. The equal-weighted index was down 4.5% in September and just under 2% for 3Q. With the trend being consistently downward, it's less surprising to see much tamer outperformance of the equal-weight relative to the market cap-weight.

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