As the all-encompassing term for the production and consumption of goods and services, the economy touches on every aspect of industry and business. Art is no different. The industry both contributes to employment and economic output while being impacted by broader factors such as interest rates, trade policies, and currency fluctuations.
From COVID-19-induced recessions, to inflation and tariffs, recent years have provided no shortage of economic volatility. The International Monetary Fund (IMF) has forecasted that global economic growth will slow to 2.8% this year (compared to 3.2% in 2024) amid trade tensions and political uncertainty.
Many have been quick to project this turbulence onto the art market. A recent upset over a series of high-profile auction flops and disappointing sales have prompted articles suggesting that demand is slower for works at the most expensive end of the market.
But such coverage only shows part of the picture when it comes to the relationship between the art market and the economy at large.
Here, we break down the nuanced connection between global markets and the art industry.
How are the economics of the art market different from other industries?
Por Que Não Mudamos as Coisas Antes? (Why Don't we Change Things Before?), 2022
Eduardo Fonseca
Ricardo Fernandes
In most industries, a product can be reproduced on a mass scale, but many artworks are unique. This makes them “non-fungible”—as the gallerist Ricardo Fernandes explains—“items that cannot be replaced by identical ones.”
This intrinsic quality limits the supply of artworks available to purchase. Artists can only produce so many pieces, and when these are purchased, they can sometimes stay in a collection for generations.
As a result, pricing can be complex, with a number of factors determining how certain artworks are valued.
“Value is largely perception-driven, based on brand, scarcity, and insider networks rather than intrinsic quality or utility,” explained art market economist Magnus Resch.
Another complication is the lack of available data on pricing and transactions. Although transparency is improving, it can be difficult for collectors to understand what is available for purchase. It can also be a challenge to access price information when sellers are sensitive about assigning a fixed, transparent value to a work.
“People play a little cat and mouse with pricing and data,” said Ken Citron, CEO of The Fine Art Group, an art advisory and finance firm. “But you can look at past sales and trends on artists. There are a lot of things you can do to mitigate that with the right expertise.”
What do trends in the art market tell us about the economy?
The art market is heavily influenced by sentiment—how confident consumers feel about their own finances and the economy more broadly.
As a result, it is often viewed as a lagging indicator of broader economic trends. “When interest rates rise or liquidity contracts, discretionary spending drops—and art purchases slow. Conversely, during bull markets or periods of wealth creation like crypto booms, we see speculative buying and price inflation,” said Resch.
How long it takes for wider economic trends to filter into the art market is complicated by the purchasing cycle. Auction houses will often start gathering pieces for major sales six months or more before the auction, creating a lag.
As Drew Watson, art services executive at the Bank of America, explained: “Things could look very rosy in June, but there could be really undesirable conditions in November on the eve of an auction.” By that point, the decisions about what will be sold have already been made.
Some areas of the market are also relatively shielded from turbulence. “The top end of the market—blue-chip art—tends to be more resilient and sometimes even counter-cyclical, as it’s seen as a store of value for the ultra-wealthy,” said Resch.
Still, the art industry as a whole is fairly removed from the stock market. In part, this is because art is an illiquid asset, meaning pieces cannot be sold quickly enough at full value to allow a timely response to market trends.
This can make art appealing to collectors who are looking to diversify their wealth allocation.
How does the art market adapt and shift with the economy?
Dollar Sign (1) (FS II.277), 1982
Andy Warhol
Revolver Gallery
Single Dollar Sign - $ (1) FS II.275, 19852
Andy Warhol
Frank Fluegel Gallery
Recent difficulties at the higher end of the market have illustrated a new price sensitivity among buyers, who are taking a more cautious stance amid economic uncertainty.
Art that is very high quality, in good condition, and fresh to market has still been selling, said Watson, but he cautioned: “In this market especially, the pricing really has to be right. And what is right in this market is more conservative pricing.”
But in times when collectors are pausing acquisitions or looking for deals, there is likely to be a ripple effect on supply. “Sellers are not looking to sell right now, maybe because they’re not getting the value that they could have. But that presents other opportunities,” noted Citron.
One of these opportunities is lending. Art is a non-liquid asset, meaning it doesn’t generate instant cashflow, but collectors can access some of the money hanging on their walls through financing—borrowing money using their art as collateral.
“For some collectors, it’s more advantageous to borrow against their art rather than sell into what may be a down market,” explained Watson.
Auction houses have also adapted to challenging economic circumstances with features such as third-party guarantees. These allow a third party to make an irrevocable bid to buy an artwork at a set price, and if they are outbid, the auction house will pay them for guaranteeing the sale.
Auction houses are also shifting towards more private sales, with Christie’s and Sotheby’s reporting a respective 41% and 17% increase last year. “A lot of that in more of an up market would have gone to auction because you can capture more of that upside through competitive bidding,” Watson explained.
How does the public perception of the art market differ from reality?
“Many people assume that art collecting is purely an investment game, but seasoned collectors emphasize that personal passion plays a huge role,” said Fernandes, whose gallery is based in Paris. Indeed, a Deloitte study found emotional value remained the key driver for 60% of collectors, though 41% said financial value was their second motivation.
“We think about art as a portion of our clients’ overall financial lives,” said Watson. “But we don't really advocate for art as a pure investment because it is a complicated asset.”
Another misconception is that art is prohibitively expensive. In reality, more easily reproducible mediums such as photography or works by less established artists can be accessible entry points, as can mid-season contemporary auctions or satellite art fairs.
It’s an oft-repeated adage that there is not one singular art world, but many different pockets and sub-sectors. Even in down periods for the economy, the situation in the art market is rarely doom and gloom everywhere. This goes for today. “It’s a really good time to start a collection, but I think you have to be discerning,” said Citron. “You can’t go wrong if you buy something you really like.”
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