With the US election campaign dominating headlines across the globe, the UK grappling with the implications of its recent leadership change and French politics emerging more fragmented than many had anticipated in its July election, some of the top centers for the art market are navigating geopolitical uncertainty.
And they’re not alone. A record number of voters are headed to the polls this year (Time magazine reports at least 64 countries, plus the European Union). But what does this mean for the art sector?
There are already signs that the market is being impacted or is, at least, on high alert for change. Industry chatter suggests that consignments to November’s New York marquee sales may be more hesitant than former years, following a lackluster set of Spring results and the US going to poll the week before the evening sales pick up pace (the election is scheduled for November 5). In France, the lack of a majority, primarily thanks to the left-wing New Popular Front alliance’s unexpected popularity, has left parties rushing to form agreements while public debate of potential initiatives, including a 90% tax on the wealthy, has knocked confidence.
In the UK, it is unclear how the new Labour government will embrace (or otherwise) former calls for a reduction in import VAT for art and antiques and a rethink of the Temporary Admissions regime. There appears to be a mix of optimism from some, who cite limited growth of the sector under the previous government, and pessimism from others.
A confidence crisis?
The reality is that wins and losses for specific measures, regions or sectors of the art market are still up in the air. This fundamentally creates an uncertain platform upon which to forward plan. That this political uncertainty emerges at a time of several conflicts (including the first war in Europe since World War II), high inflation, and the progressing impacts of Brexit and a global pandemic, are all cited as contributing to a so-called art market ‘cooling’.
There are some consistents. With elections you can expect discussion of economic policy, which can directly affect the art market. Taxation, public spending, and financial regulation all directly alter the disposable incomes of potential buyers and investors. A government favoring lower taxes might leave collectors with more disposable income, potentially boosting their purchasing power and confidence to invest. Conversely, a government inclined towards higher taxes and increased regulation could lead to a tightening of financial belts, with collectors becoming more cautious.
Election outcomes can also prompt significant currency fluctuations, although a recent report by City Index suggested that, at a ‘high level, the US dollar has not shown a consistent trend of strengthening or weakening in one month before, one week after, one month after, or one quarter after the US Presidential Election days.’ Foreign policy is another key factor. Sanctions have had a notable and visible impact on art trade in recent years, restricting the movement of artworks, complicating transactions and limiting the participation of some influential collectors globally. Similarly, regulatory shifts and priorities are followed closely by a trade which has seen major transformations in its approach to transactions, notably as a result of international introduction and enforcement of anti-money laundering legislation.
Perhaps more significant than shifts in independent countries and regions is the degree to which the direction of change across the globe converges or diverges. Alignment (or lack of) can affect broader market trade flows, with one only needing to look at the confidence and growth of France’s art market since Brexit to appreciate the very real consequences of decisions made by politicians.
The relationship between wider cultural policy and art markets should also be considered. Governments prioritising cultural development might increase funding for museums, galleries, and public art projects, fostering a vibrant local art scene, whilst a reprioritization of cultural funding can stymie market growth. Either way, all eyes will be on the detail of new governments.
If there’s any sure bet over the next 12 months, it is that there will be surprises. If there’s one thing the art market has demonstrated over the past 5 years, it is its ability to ride out uncertainty. To the polls we go!