Is art a hedge against inflation?
london. A recent swathe of auction records has led, as in 2004, to speculation that the rich may once again be treating art as an investment vehicle. Major records include Giacometti’s L’Homme Qui Marche I, 1960, which sold for £65m at Sotheby’s London in February, Picasso’s Nu au Plateau de Sculpteur, 1932—the world’s most expensive work of art—sold in May, for $106.4m at Christie’s New York, and Rubens’ Portrait of a Commander, around 1612-14, sold for £9m at Christie’s London last July.
This was backed up by a report by Capgemini SA and Merrill Lynch & Co published in June, which found that the number of global millionaires grew 17% last year, and, with financial markets in flux, art had emerged as the most popular category of “passion investment”. Trade sources agree. As New York old master dealer Richard Feigen, told The Art Newspaper earlier in the year: “The art world is inundated with money—there’s so much liquidity out there because people are afraid of currency. They’ve been told that art is a place to park cash.”
Art appeals because it is tangible, can be traded in any currency, and comes with kudos—collectors cannot hang stocks and shares on a wall to show their friends. Art may be particularly attractive now because of the uncertainties of the stock markets, big currency fluctuations and the looming spectre of inflation in some major countries, and deflation in others. Giovanna Segre, lecturer in the economics of culture at Turin University, observed in an article on this subject for our sister paper Il Giornale dell’Arte, the anti-cyclical nature of the art market could be coming into play. The art market “offered annual returns of more than 7% between 2001 and 2004, when the stock-market exchange index was in the doldrums”, she wrote.