How does the economy affect art investment returns?

22 January 2019|investment |James Nicholls

How does the economy affect art investment returns?

Art investment returns have long represented a relatively safe bet during turbulent times in the financial world.

This market is largely uncorrelated to major stock markets, and often used by investors as a way to diversify portfolios in times of economic uncertainty. As art is a tangible asset, it will always have a residual value, unlike other investments such as stocks and shares. Individuals can also enjoy displaying an art investment in their home or elsewhere, providing a satisfaction unique to fixed asset investments.

Art investment becomes more popular in turbulent times

“In my experience, when the market goes up and down, up and down, that’s good for art,” New York dealer Christophe Van de Weghe recently told Bloomberg. “Over the last 30 years, volatility has been very good for us dealers, because that’s when people want to buy a hard asset.”

As well as concerned investors, hedge funds will apparently spend more on art during these times, “because they tell me that they make more money when there’s volatility in the market,” Van de Weghe explains.

One man’s spring clean is another’s opportunity

A slumping stock market can often impact individuals who happen to have art investment portfolios, and their decision to free up capital could spell opportunity for other collectors.

“That’s a moment where access to certain pieces is possible. So if you know you want a specific [artwork], a moment where the market is softer is a great time to be active,” explains Marc Payot, a partner and vice president of Hauser and Wirth. Anyone in the position to buy is able to snap up the works that others choose to sell.

Art investment returns are best over the long term

“These markets are driven much more by psychology than they are by economic factors,” ArtAssure’s Asher Edelman explains. For this reason, it’s important to educate yourself. Rather than constantly tracking movements in the market and potentially panicking over sensationalist news articles, do your research before purchasing a piece of art and avoid simply jumping on the latest trend.

“It’s never good to sell art in the short term if you have to,” admits Edelman, “but then, that’s true for everything, including real estate.”  Art investment is best suited for long term gains, as it’s not a liquid asset. For this very reason, it’s advisable to invest in art that you truly admire and gain pleasure from.

If you would like to discuss art investment returns further, please get in touch with Maddox Gallery. Our expert Sotheby’s trained art consultants would be happy to advise you further.

Written by James Nicholls, Chairman, Maddox Gallery.

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