Just How Bad Is the Art Market’s Case of the Blues?

(Illustration by Elias Stein)

The art market has the blues. A recent paper from finance scholars Jianping Mei and Michael Moses sums it up: “As Bad as It Gets With No Green Shoots in Sight.” In fact, says Moses, results have been “consistently poor” for the past six auction seasons. “There’s never been a time this century when returns have been this bad for this long,” he says.

While first-half New York sales rose 1.2% at the three big auction houses—Christie’s, Sotheby’s, and Phillips—global sales fell 6.2%, notes data and analysis firm ArtTactic. Growth, inflation, and geopolitical concerns “are weighing on confidence and creating a more cautious investment climate,” writes ArtTactic CEO Anders Petterson.

Created with Highcharts 9.0.1Not a Pretty Picture Since 2008, the percentage of artworks sold at auction with negative returns has been​rising. Source: JP Mei & MA Moses Art Consultancy

Created with Highcharts 9.0.1'05'10'15'202000510152025303540455055%

Mei and Moses analyze works sold since 2000 and bought at auction since 1970. They calculate the compound annual return of works sold and their standard deviation (how much returns vary over time). They look at the coefficient of variation, or COV, to measure the risk of each unit of return.

Created with Highcharts 9.0.1Buy on the Dip?Repeat sales of artworks in the spring auctions revealed few bright spots. Mean Compound Annual ReturnSource: JP Mei & MA Moses Art Consultancy

Created with Highcharts 9.0.1American PaintingBritish PaintingImpressionists/ModernLatin American PaintingOld MastersPostwar Contemporary Art-3%-2-101234

The mean returns of works sold in the spring auction season globally was a negative 0.2%—from 0.1% a year earlier. While returns sank, risk rose—to a 16% standard deviation, resulting in a COV of negative 80—only the second time since 2000 that risk/return was negative. Over the past three seasons, more than 50% of works were sold for a negative return. The good news? “If you believe in mean reversion, which we do, this might not be a bad buying opportunity,” says Moses.

Write to Abby Schultz at abby.schultz@barrons.com

Last Week

Markets

The dollar hit lows last seen in 2000 as President Donald Trump amped up tariff uncertainties. Stocks fell after he sent letters to countries warning of reciprocal tariffs, including 25% on Japan and South Korea, if they didn’t agree to deals by his new Aug. 1 deadline. He also warned of an extra 10% on countries aligned with the Brics bloc, floated 50% copper tariffs, 200% on pharma products (in a year and a half), 50% on Brazil for persecuting former President Bolsonaro, and 35% on Canada. Wall Street shrugged it off; Nvidia broke $4 trillion in market value, and the S&P 500 hit a new high on Thursday, then stocks retreated on Friday. On the week, the Dow Jones Industrial Average was down 1%, the S&P 0.3%, and the Nasdaq Composite 0.1%.

Companies

Tesla stock fell after Elon Musk said he was starting a new U.S. political party. X CEO Linda Yaccarino quit. The Supreme Court allowed federal layoffs to proceed. The Wall Street Journal reported that Kraft Heinz was preparing to spin off part of its grocery business. The Justice Department said it was investigating UnitedHealth Group’s billing practices.

Deals

Chinese online fast-fashion retailer Shein applied to go public in Hong Kong after attempting to list in London…AI cloud provider CoreWeave agreed to buy data-center operator Core Scientific for $9 billion, all in stock…Merck is acquiring lung-cancer specialist Verona Pharma for $10 billion…Italy’s Ferrero Rocher is taking cereal maker WK Kellogg private for $3.1 billion.

Next Week

Tuesday 7/15

Second-quarter earnings season begins in earnest with results from the financial, healthcare, and tech sectors. BlackRock, Citigroup, JPMorgan Chase, and Wells Fargo release earnings on Tuesday, followed by ASML Holding, Bank of America, Goldman Sachs Group, Johnson & Johnson, and Morgan Stanley on Wednesday. Abbott Laboratories, Netflix, and Taiwan Semiconductor Manufacturing report their quarterly results on Thursday. American Express and Charles Schwab close out the week, announcing earnings on Friday.

The Bureau of Labor Statistics releases the consumer price index for June. Economists forecast a 2.6% year-over-year increase, two-tenths of a percentage point more than in May. The core CPI, which strips out food and energy prices, is expected to rise 2.9%, compared with 2.8% previously.

Thursday 7/17

The Census Bureau reports retail sales data for June. Consensus estimate is for a 0.1% month-over-month increase, after a 0.9% decline in May.

Friday 7/18

The University of Michigan releases its Consumer Sentiment index for July. Consumer expectations for year-ahead inflation was 5% in June, down from a four-decade high of 6.6% in May.

The Numbers

10.9 K

Number of M&A deals announced in the second quarter, the fewest since 2015, excluding pandemic 2022.

3.6%

Producer price deflation in China in June, the weakest reading in two years, down from 3.3% in May.

74%

Percentage of global wind and solar projects being built in China this year, 510 gigawatts out of 689.

$29 B

How much U.S. power producers are asking in rate increases so far this year, up 142% over a year ago.

Write to Robert Teitelman at bob.teitelman@dowjones.com