We’ve been hearing for a few weeks now that the country is headed toward a recession. It may not be immediate, but the projections are that it could come sometime in the next two years. So while it may not be time to make any immediate moves, we should all look to protect ourselves wherever possible.
If you’re a long-term investor, you likely don’t need to do anything. Markets will go up and down, and you just have to weather the storm. Trying to time the market is a fool’s errand.
The Argument For Art
But if you want to be more active with your investments, consider buying art as a possible hedge against the stock market. In 2018, the art market returned 10.6%, which is quite hefty and we should all pray for those types of returns going forward.
The art market is not correlated to the stock market, so when the stock market goes up or down, the art market does not necessarily follow. It follows its own track, so owning art could be a great way of diversifying your financial portfolio. The art market is also very slow to move, since day-to-day news does not impact the art market the same way it does the financial market.
How The Art Market Faired In The Last Recession
From 2007 to 2009, during the last recession, auction prices fell by about 27%, whereas the S&P 500 fell 57% from its peak to hitting its low in March 2009. So if you’re expecting a recession, art may not appreciate the 10% it did in 2018, but it’s unlikely to sink as much as the stock market might.
The art market bounced back quickly, however. By 2012, it had already reached its 2008 peak and continued to grow. In fact, in 2015, the art market hit a record $4.2 billion in sales. It’s not a small market!
Is It For You?
While last year was volatile and we shouldn’t expect either the art market nor the S&P 500 to perform at the rates it did, it’s an indication that it can be part of your portfolio. With artists like Picasso, Monet, and Warhol, you can have access to the same investments that were once limited to the rich and connected. Now, you can get in the game!