Talk about a double dip recession has coaxed the oracles of the art world away from their swimming pools to their laptops. Savvy trend-watchers have been grappling with a surprisingly meaty question for this time of the year? Will the art market follow equities into “correction” territory, or worse, this fall?
The verdict? Maybe. Or maybe not. They don’t call it the dismal science for nothing.
Adam Lindemann in the New York Observer compared art unfavorably to gold. “Despite all the talk of art as investment, and the fact that a lot of art has appreciated, I think you would still be much better off with gold,” he concluded. Noah Horowitz, answering interview questions in the same publication, said art has more in common with gold—as “as a durable good,” he argued, it “is attractive to people in times like this.” However, he cautioned, “If we see a decrease in wealth levels of the elite, that’s one way to gauge how art will be valued.”
With more gyrations almost certain to roil the financial markets, expect a spike in art-market prognostication in the weeks to come. Yet as Noah correctly points out, we’ll need to get past the big fall art fairs to get a true read on the market’s direction. In the meantime, here are three dynamics to watch.
First, will the bifurcated trend pattern separating hyper-luxury from everything else persist, or will a potential downturn be severe enough to sink all boats? The post-2008 experience tells us that horrible things can happen to the economy while the upper-upper tier of the market chugs along, relatively unscathed.
Second, has so much excess been built into the art market as to threaten a nosedive? Really bad art crashes happen when years and years hype and speculation drive up prices of historically untested art to unsustainable levels. Think 1991. Periodic crashes are severe because there is nothing “hard” in art to keep prices from falling, but they are also healthy in a Shumpeterian pruning sort of way. One may argue that after the hard crash of 2009 enough hot air has been siphoned out of the market to diminish this threat. But who knows.
Third, will public policy throw a curveball at the art market? By this I mean not just the potential effects of high inflation (as far as I know there is no definitive study on the relationship between inflation and art prices). I mean the very real possibility, especially in the United States, that lawmakers tighten the screws on the nonprofit sector. The implications of a reduction in tax benefits on art donations to museums, for example, cannot be ignored. It could remove a lot of demand, at the worst time.
These are just some thoughts to ponder as you return to your beach reading and your sunset cocktails. What other trends might reshape the markets in the months to come?