On June 12th of this year, the Chinese stock market bubble popped, a bubble which was mostly fueled by the myriad of enthusiastic mom and pop investors throughout the nation of China wanting to get in on the seemingly ever improving financial situation of the Chinese markets. As with most bubbles, one can see the potential for the popping coming closer as the market seems to expand into a incomprehensible echelon. There were rumors of colluding, fraud, and other typical blame-shifting maneuvers; it was in fact simply hedgefunds, pension funds, and other investing entities that watched the market closely, saw the trends, and within a single day, all decided to get out, crippling what once was and still is considered one of the most powerful stock markets on the globe. This “crash” that occurred in mid June had a rippling effect on economies all across the world.
With only 1.5% of Chinese shares owned by foreigners, there is little worry that portfolios were or will be directly affected, but it is the possibility of a considerably more contentious melt down that has put most markets in a downturn. Spectulation, not just actuality, affects markets dramatically, if not even more significantly.
But what does this speculation mean for the art market?
From June 23rd to August 25th, about two months, Sotheby’s publicly traded stocks dipped almost 28% moving from around $47 to $34 a share. Currently prices are still hovering around the $34 mark. To give persepective using two large corporations, in the same time period Apple Stock dropped a little over 19% and Walmart Stock dropped a little less than 15%. The market trends have been negative for a time, and we are just now seeing a little bit of stabilization and bounce back from this fallout in many corporations. Now, Sotheby’s common stock is not the end-all be-all for analyzing the art market as there are many nuances associated with the art marketplace, but it is a nice starting block.
A recent opinion piece on Artnews.com by Kenny Schachter, a London-based art dealer, curator, and writer, highlights what has gone on in the recent past in the art market, citing his own experiences, what the present looks like, and particularly interesting, what the future seems to hold for the contemporary art market. He stays relatively optimistic in the article and speaks of people in the art world as “lifers,” as it is more about the art and enjoyment from the art than the actual monetary aspect, which will hold the market in relative stability.
“…such relentless volatility, at least in short term, renders art and classic Ferraris and Porsches even more attractive and stable by comparison.”
“Look for people to hunker down with the things and people they know, buying obvious art by obvious artists from obvious art dealers and auction houses.”
“The prematurely high-priced emerging-art shakeout has been a good thing, and the market, for now at least, is still in rude health.”
The art market is one of the more unpredictable markets in the world, but within that volatility is this interesting sense of stasis and safety because of the ever-present human interest and need for the aesthetic and the creative. The art market usually fluctuates with significant changes in wealth, not necessarily market trends, so in the short run it is affected little, but in the long run significant trends can develop. Art collectors worldwide should not be worried about too large of a fallout in this space stemming from the Chinese bubble burst, but it always good to keep track of what goes on within certain markets when episodes like this occur.