Art: the 21st century's deity

To understand the extraordinary results for Contemporary and living artists during the past major auction sales despite the extreme macro volatility and turmoil, one must understand first the basic structural logic of the art market. There are over 12 million HNWIs in the most important art purchasing markets formed essentially by collectors and investors. On the supply side, the auction market is conformed of no more than about 3.000 works per year of the top 200 Contemporary and living artists (works from their respective most valuable categories), with roughly 20% of these concentrating 80% of the value. And once in the hands of a lucky few, traditionally, these objects have rarely come back on the market unless the unavoidable Triple D law (Debt, Divorce and Death) came into effect.

Christie's hybrid auction of 20th Century Art preview

Via Fotoscapes

However, the substantial increase of art finance from a quantitative and qualitative perspective within the industry in the last years has increasingly allowed owners to avoid the necessity to even sell under any circumstance while keeping liquidity high and taxation low. Not to mention the US’ favorable tax deductions on art donations, which strongly diminishes supply in favor of art museums -our new cathedrals-, which, by the way, increases the collectors art’s investment potential through write-offs that allow to save on the substantially high entry/exit agency fees. And since the US represents almost 50% of the global art trade, one can only imagine the incidence of this local tax incentive on the international art supply. All this has not only affected the volume of supply but also the value. Unfortunately, in a market where demand surpasses by far supply, sometimes having something is better than nothing. And this missing-out fear from buyers is what is essentially driving the strong results we are observing at auctions despite such critical moment for the world. But this could only speak greatly of art’s value beyond aesthetics; its low correlation to monetary assets and even to economic variables such as GDP, as seen in the past 6 months auction sales results, positions art in a very healthy outlook for any doubtful collector or investor considering entering the market now.