Art-рынок in times of crisis. Part 3: War and political turbulence
ARTinvestment.RU   02 апреля 2020

The end of the cycle indicators of the art market during crisis periods

the Previous articles in the series "Art-рынок in crisis" read on AI: Part 1: Epidemic and Part 2: Depression.

Before to sum up the results and share recommendations with readers on the current AI behavior in the art market, consider the past negative factor and a "risk group" — war, hot and cold.

During the long armed conflict of the last century, art indexes exceeded the major stock market indexes. Talking about it data statistics and Global Financial Data indexes The Sotheby's Mei Moses Indices. From 1913 to 1920 (including world war I 1914-1918) stock prices on the London stock exchange, according to a report from the Financial Times All Shares Index reached its lowest level in 1918, lost during the whole period, about 25 % of the values of 1913. After 1918, the index grew slowly and by the beginning of 1920 reached 94 % of that in 1913. In the US the S&P500 also reached a low in 1918, having lost 26% of the values of 1913. By the beginning of 1920, he also grew to 94 % from pre-war figures. On the contrary, the index of the art The Sotheby's Mei Moses Indices between 1913 and 1915, the years fell more — on 34 %, but by 1920 showed 125 % of the value for the last pre-war year.

Taking the period of the Second world war a bit wider historical dates from 1937 to 1946 (which is quite acceptable for the purposes of this analysis), we will see the following: the indices of the London stock exchange began to decline beginning in 1937 (2 years before the war) and lost to the mid-1940 about 50 % of its value. Then the stock price began to rise and by mid-1944 on par with pre-war figures. Continuing the growth, in 1946, the stock market index reached 107% of the values of 1937. In the US the S&P500 by the beginning of 1938 has fallen by almost 50% and continued to decline until 1942. And then began to grow steadily and by the beginning of 1946, also slightly exceeded their pre-war figures. Index art The Sotheby's Mei Moses Indices increased by the end of 1939 to 88% compared to the values of 1937 and by early 1946 had 130 % of its pre-war indicators.

More recent armed conflicts involving the United States (which also took place outside U.S. territory) give a similar picture: in the period of the Korean war (1949-1954) the index of The Sotheby's Mei Moses Indices increased by 108 %. Interestingly, a separate index to the paintings of Impressionists grew by 167 %, old masters –— by 109 %, and American postwar painting — only 13 % (at the time this direction in art has made only the first steps, and the contemporary art market in General was in its infancy). In the period of American involvement in the Vietnam war (1965-1973, but we take a slightly wider than) the index of art objects has also increased: by 1975, it was 256 % of the value for 1966 (a separate index of American painting has risen by 244 %, Impressionists — 240 %, and the old masters — "only" 209 %).

the Concept of "geopolitical turbulence" came into use in the art market in 2010-х. Since 2013, it has consistently ranked first in the ranking of future fears of market participants of art in the Deloitte report Art & Finance and Art Market ArtTactic Outlook from — and at the same time from year to year remained a concern. The first reaction to turbulence (Ukraine, Russia, the Middle East and U.S. elections) gaveitself felt in decreased by 17% sales art for the period 2015-2016, and then the market, showing a two-year growth returned to previous levels. However, in 2019, trade conflicts between the US and China, political unrest in Hong Kong and protracted "Brakcet" again led to a drop in sales of the global art market by 5 %. Collectors in the past year gave the preference for private sales compared to more risky public auctions: the volume of public trading market suffered the most, falling by 17 %, to $24.2 billion, while private sales at auction houses is mainly grown.

Review AI: it is important to understand that the war — is the destruction of the economy of one country (or countries) and the significant increase in other (other). The economy of the winning side, as a rule, also is on the decline caused by the conflict. Another thing —, the country's economy, serving as an ally or a leading military actions on foreign territory (in both cases, — with the supply of weapons). In this case, she strengthens the middle class and formed a new high: in these limits where new collectors. World war, especially the Second, following the mass emigration, brought to the market of previously inaccessible high-quality art — wealthy Americans have purchased them. Note: the average price level exceeded the pre-war — in other words, most of the transactions took place without the discount. Recall that we are talking about the price index of art, not sales: the speed art-рынка in a protracted war is always inferior to the indicators of peace. In the economies of the countries involved in the conflict, draws attention to the time of the beginning of recession — for several years before the actual outbreak of war. Note the political turbulence — term that today often explain trade war and the struggle for power. In the information age these factors lead to a local "extraordinary" crises and significantly affect the art market — in the first place because in the XXI century it is from the community of regional markets has become a truly international and cross-border and weakening the development of any region of the world affects the market as a whole.

to sum up in three series move on to practical recommendations for the main players of the art market.

What collector?

1. Avoid leaving valuable objects of art in the beginning of the recession, especially if you have "blue chips" — works by the most important periods top-художников. Remember that piece of art — is a vessel in which is stored your savings in the crisis period: from the beginning of the revival of the market you will be able to sell it at a cost higher than the original. Of course, assuming that you wisely went to commit the original purchase.

2. If you own a masterpiece (i.e. unique offer to the market, even in years of growth) and you need immediate monetization — do not be afraid to sell it. Unique objects of art can be successfully sold, even in periods of recession. In this case, the auction house will be on your side: they need to show that the market is alive, and this is best done with the help of record sales. In the case of less valuable works, top-художников auction house,likely to keep you from trying to put them up for auction — to avoid the predictable not sold.

3. The best liquidity during the crisis show objects of art valued from $100 thousand to $1 million, created by artists whose average price range before the crisis was in the same range.

4. Perhaps you should pay attention to the local art-рынок experiencing the least turbulence. Statistics show that even in the midst of a global recession a separate world regions react to the crisis by-разному. In particular, periods of recession in individual countries come later, if there remain in the operating mode-site sales and collectors who may be interested in your art, —, it may be the best solution.

5. All-таки in times of crisis, to a collector it is better to be in the mode of data collection. During the recession may significantly change the position of individual artists — in particular, in the segment of contemporary art, the promotion of which are major art-дилеры and galleries.

6. If in a crisis, collector has the ability and the desire to allocate available money to purchase with a discount, the — in addition to our greetings —, we recommend first working with private sales departments of auction houses. In respect of private transactions, the auctions will not be to hold collectors to part with discount prices: the market on the results of those sales did not know. In the end, you will be able to acquire valuable work. And again: the priority has to be proven names who have had more than one recession, — for this and there are databases of auctions and other tools for self-analysis.

What the gallery owner?

1. Make friends with technology and faster to go online. Best of all intuitively prepared for the current situation Larry Gagosian: a year ago, he used to work six technological solutions, by the beginning of 2020 — fourteen. More than half of them sent to work with the buyer and selling art through the Internet, including storage and logistics.

2. Be careful when choosing fairs after the end of the quarantine even after the resumption of "fairground carousel" is not all the regular collectors will be able to come. Some are busy repairing their own business, others won't be able to spend time in the shifted graph. The third group of collectors can have psychological barrier to travel in the coming season.

What do the artist?

1. Not to forget that the greatest masterpieces in art history were created in difficult times — war, epidemic and depression, and to continue to work.

2. Doing creative work, keep in mind that successful artists are better in recession, than those who are of interest to regional or less experienced collectors. Accordingly, in the period of market growth, the young artist must have time to prepare for the next crisis. It had to be 8-10 years.

3. Constantly monitor grant programs that are emerging today and will proliferate in the near future. This is an opportunity to not only survive the crisis but also to enter the international art community (if not done so previously).

4. Remember thatthe artist for society today — is not only an active participant in social networking, but also to a certain extent the indicator of social mood. For artists and watching them sign their words and actions are followed by millions of people. That they bear the greatest responsibility for what mood the world come out of the current situation: with a smile and the desire of the Creator or irritation and anger hermit.

Denys Belkevych, AI