Heather James has received many questions regarding the art market’s performance during volatile economic cycles. To respond, we are happy to share this video of gallery co-founder Jim Carona offering his in-depth analysis on the topic. Looking at the art market’s resilience during the 2008-2009 recession, we present our key observations as to why the art market has proven to be more resilient than other assets.
All-Art Index Chart showcases pre-recession high to recession low to post-recession bounce back from 2008-2010
- In recessionary periods, the art market has been the last to decline and first to recover. We saw this during the global financial crisis of 2008-09.
- While the S&P began declining in mid-2007, the all-art index did not trend down until late 2008.
- At its lowest point, the art market saw a 19.3% decrease from pre-recession highs, while the S&P saw a 47.7% decrease. The S&P 500 took four years to return to its pre-recession high from the low point, and this bounce-back occurred in under a year for the art market.
- Measured from the pre-recession highs, the art market took just 20 months to regain, while the S&P 500 took 5.5 years.
- Collectors have historically held onto their artwork during recessionary periods, further contracting supply and often leading to a high-demand situation.
- In February 2009, while traditional financial markets remained down, the hugely successful Yves Saint Laurent sale at Christie’s totaled nearly $484 million, setting the record as the most expensive private collection at auction. 95.5% of all lots sold.
S&P 500 Index Chart showcases pre-recession high to recession low to post-recession bounce back from 2007-2012
- In the early 2000s, the art market experienced a much milder recession than the financial markets. The peak to trough decline of the S&P 500 was 49.1%, whereas the all-art index only declined 18.82%.
- Fine art has a low correlation of 0.12 to the stock market, partially accounting for the strength of the art market during economic turmoil.
Source: Citi Private Bank Global Asset Allocation Team, as of October 31, 2020. Correlations are measured on a scale of 1 to -1, where 1 = two asset classes move in the same direction all of the time, -1 = two asset classes move in the opposite direction to each other all the time. Art represented by the Masterworks.io Total Art, Contemporary Art and Impressionist Art Indices. 2020 Masterworks.io LLC; All rights reserved. Indices revised as of November 2020.
“When our market slows down, fewer things become available to sell, but anyone waiting around to get a 30% discount on a masterpiece may be disappointed and frustrated. We’re kind of like the oceanfront property that everyone’s waiting for the right moment to buy, but there’s a lot of money waiting for that moment. As soon as the price for anything goes down even a little bit, people start to jump in.” – Charles Stewart, CEO of Sotheby’s
Heather James Fine Art is not a registered investment, legal or tax advisor. All investment and financial opinions expressed by Heather James Fine Art are opinion based on personal research. Past performance is not a guarantee of future return, nor is it necessarily indicative of future performance.