Fine Art as Lagging Indicator

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Sculptures by Constantin Brancusi are auctionned on Feb. 23, 2009 at the Grand Palais in Paris. Photo by Patrick Kovarik/Newscom

The news from the Mei Moses Art Index is that the value of art plunged a whopping 35 percent in the first quarter of 2009. Unfortunately this not-very-new news can barely be heard above the global din of galleries shuttering their spaces and either suspending operations or ceasing business entirely, and an art world still wondering when this all might turn around.

It is clear that even the market for “super bluechip” works has softened, with both the contemporary and old master field showing significant declines in value. But to be clear, the index that is reporting this downturn, and the poor sales results—though a remarkable tool—is based solely upon reported results from public auction, and does not reflect any private gallery sales, or even the “private treaty” sales that auction houses make to dispose of materials that did not sell at auction (or the sale of which was deemed too sensitive to be made public. This might include works sold by newly impoverished Wall Street tycoons or Madoff victims).

One thing that is clear from the historical evidence is that there is no direct correlation between the S&P and the art market. Rather, the art world downturn tends to lag behind the general economy by about nine to 14 months. As such, the smart money is sold quickly at the first sign of the collapse of the equity markets, and will snap up bargains in the depressed art markets as soon as they sense the equity market upturn has begun in earnest.

David A. Ross is the former director of the Whitney Museum of American Art and the San Francisco Museum of Modern Art.