Until January, the stock market was on an almost-unbroken bull run for nine years. Now that run appears to be ending and prominent members of the financial community are warning about the possibility of a significant correction, leaving people in the art world wrestling with whether this will affect their sales.

A decade ago, during the last financial crisis, the art market responded to the stock market with a lag of about seven months. Bear Stearns collapsed in March 2008, but the May auctions in New York that year set records. Sotheby’s held its largest sale ever; over the course of two weeks, $1.56 billion worth of art changed hands.

“By April 2008, we knew that the seams [of the stock market] were coming apart,” says Asher Edelman, a financier-turned-art dealer who founded the company ArtAssure Ltd. “Everyone who was buying and interested in art was thinking, ‘Oh, this is kind of a safe thing to do,’ and they didn’t pay attention to what was happening in the market.” 

By the time the November auctions rolled around, Lehman Brothers had filed for bankruptcy, the stock and bond markets had plummeted, and the art market had imploded.

A third of the lots at Sotheby’s Impressionist and modern art evening sale went unsold. Christie’s evening sale in the same category fared even worse, with 44 percent of its lots going unsold; its total, $146.7 million, was nearly $100 million below the auction’s low estimate of $240.7 million.

The question now is: Should collectors, dealers, auction houses, curators, and everyone else who relies on the art market’s continued success, be worried?

The market’s bull run has been sputtering just as New York is poised for record-setting art fairs (Frieze, Tefaf New York) and auctions, which include the week-long, possibly billion-dollar Rockefeller sale starting at Christie’s on May 8 and Sotheby’s May 14 Impressionist and modern art sale, in which a painting by Modigliani is carrying an estimate of $150 million.

Realizing Gains
“In my experience, when the market goes up and down, up and down, that’s good for art,” says Christophe Van de Weghe, a New York dealer who will be exhibiting at Tefaf New York next week. “Over the last 30 years, volatility has been very good for us dealers, because that’s when people want to buy a hard asset.” Art, like gold, ostensibly represents a financial safe haven during turbulent times.

Indeed, Van de Weghe says, it’s a double-plus: One group of collectors leaves the market in order to realize gains, has cash sitting around, and then puts it back into art.

An additional group, specifically hedge fund managers (many of them Van de Weghe clients) will spend even more on art, “because they tell me that they make more money when there’s volatility in the market,” he says.

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