Every Friday, Artnet News Pro members get exclusive access to the Back Room, our lively recap funneling only the week’s must-know intel into a nimble read you’ll actually enjoy.

This week in the Back Room: How to tell if the art market is headed for a recession, a collector’s legal battle with a fruit company, the Asian market’s newest darling, and much more—all in a 6-minute read (1,800 words).

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Top of the Market

Recession Lessons

Ed Ruscha, Ripe (1967). Courtesy of Christie’s Images, Ltd.

Calling the top of any market is tricky. But as a recession looms, cryptocurrency continues its freefall, and inflation reaches record highs, some people are saying it: The art market has peaked.

“I think we already passed the top of the market,” a money manager with a major bank told Artnet News’s Katya Kazakina last week. “We are over the hump and now on our way down.”

We’ve been here before. There was the bloodbath of October 2008 in London—the Phillips evening sale where lot after lot after lot after lot flopped. There was the fall of 2016, when Zombie Formalism imploded.

This time around, things are different. The pandemic has transformed the way the market operates—what it values, how it retains value, how it processes information.

Here are three key indicators market observers are watching now as they try to gauge what comes next—and why, in each case, it will be more difficult to break through the noise than ever before.

1. Interest Rates

Since the 2008 financial crisis, the growth of the art market (and other alternative asset classes) has been underpinned by historically low interest rates. Not anymore. After U.S. inflation hit 8.6 percent in May, the Federal Reserve raised its short-term benchmark rate by 0.75 percent, the biggest hike since 1994. If history is any guide, it’s going to take a little while for these changes to be felt in the art market: global auction sales didn’t decline sharply until 2009, the year after the Great Recession hit. But they will.

Complicating Factor: Inflation

While the diminished supply and tentative demand that often accompany a market contraction push prices down, inflation—which we are currently experiencing across the economy—pushes prices up. “I don’t know which direction the average [price for art] is going to take given those contradictory forces,” said Yale professor William Goetzmann.

2. Auction Results

Because sellers often consign works between six and three months in advance, auction results can be a lagging indicator of market health. But a slowdown will eventually be visible as a decline in volume, especially in high-priced lots, as well as in sell-through rates. (In 2009, the number of works consigned with a low estimate of $10 million or higher dropped nearly 75 percent.) Keep an eye on next week’s London sales, and an even closer one on November’s marquee New York auctions, to see how the composition and size of the sales evolve.

Complicating Factor: Withdrawals 

Savvy auction houses have learned how to boost their sell-through rates by simply withdrawing the lots that don’t drum up enough presale interest. That makes the true state of play harder to discern.

3. Speculation

Since the onset of the pandemic, new money has poured into the art market’s most speculative segments: NFTs and emerging art. Such high-flying sectors have also historically been hit hardest in a downturn (think: French contemporary art in the early 1960s, non-conformist Russian art in the 1990s, and Zombie Formalism in the mid-2010s).

Complicating Factor: BOGO

These days, galleries promote “BOGO” deals, selling coveted pieces only to collectors who promise to buy a second work and donate it to a museum. Forthcoming market turbulence will be a test of whether this new development can shield young artists from being wiped out by the market.

Savvy auction houses have learned how to boost their sell-through rates by simply withdrawing the lots that don’t drum up enough presale interest. That makes the true state of play harder to discern.

The Bottom Line

The practice of reading the art-market tea leaves proves just how much the business has changed since the onset of the pandemic. Traditional signs of a downturn—declining prices, lower sell-through rates, and the puncturing of speculative bubbles—may no longer offer an accurate barometer. More revealing are lackluster consignments, smaller sales, and, on the primary market, the disappearance of hoops to jump through in order to access work by young artists. In other words, if you no longer have to BOGO, it might be a signal to GTFO.

[Read More]

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Paint Drippings

Jane Scher (right) and Libbie Mugrabi sporting Libbie’s hats at an event on May 28, 2021 in Southampton, New York. (Photo by Sean Zanni/Patrick McMullan via Getty Images)

In this week’s Wet Paint, collector Libbie Mugrabi is forced to change the name of her accessories company to resolve a legal dispute with a fruit producer (you can’t make this stuff up!) and a group of NFT artists are going to the moon.

Here’s what else made a mark around the industry since last Friday morning…

Art Fairs

• The final wave of art fairs before the summer lull is upon us: BRAFA in Brussels (June 19–26); TEFAF in Maastricht (June 24–40); and Masterpiece in London (June 30–July 6). (Press releases)
• Independent has revealed the 31 galleries—including Cheim & Read, Corbett vs. Dempsey, and Fortes D’Aloia & Gabriel—participating in its new 20th-century art-focused New York fair, which will run alongside the Armory Show in September. (Press release)

Auction Houses

• Phillips’s 20th century and contemporary art evening sale in Hong Kong fetched a middling $27.3 million on June 22. The total was down substantially from a year ago, but new records were set for Lucy Bull, Trey Abdella, Miwa Komatsu, and others. (Artnet News, Barron’s)
• Noah Davis, the NFT whiz kid who brought us the $69 million Beeple sale, is leaving Christie’s to become brand lead of CryptoPunks at Yuga Labs. (Artnet News)

Galleries

• The Chilean artist Cecilia Vicuña has joined Xavier Hufkens in Brussels. She will continue to be represented by Lehmann Maupin. (Press release)
• Timothy Taylor is expanding in New York, hiring Stephen Truax as director and moving into a 6,000-square-foot space in Tribeca. (Press release)
• Two London galleries, Castor and Indigo and Madder, are taking over a 2,200-square-foot space in Fitzrovia; their programs will remain separate but they will share expenses. (The Art Newspaper)

Institutions

• Wendy Whiteley, the former wife of Australian artist Brett Whiteley, has pledged her 2,000-work art collection and home to benefit the Art Gallery of New South Wales, a gift estimated to be worth $100 million. (Sydney Morning Herald)
• The Carnegie International released the lineup for its forthcoming 58th edition. Participating artists include Diane Severin Nguyen, Susan Meiselas, and Trương Công Tùng. (Artnet News)
• Market players handling transactions of €10,000 or more who did not register with U.K. authorities by June 2021 are starting to receive fines in accordance with the government’s anti-money laundering legislation. (The Art Newspaper)

Other Business

• Post-Art Basel, the traveling art circus headed to Hydra for a Jeff Koons show at Dakis Joannou’s Deste Foundation, and to Menorca, where Hauser & Wirth presented new work by Rashid Johnson. (Cultured, Artnet News)
• British art dealer Robert Newland, who was indicted this past February in connection with the criminal case against Inigo Philbrick, is facing extradition to the United States. (Artnet News)
• Vivian Hewitt, a librarian who amassed one of the world’s top collections of Black art with her journalist husband, John Hewitt, Jr., died at 102. Their 500-work trove includes examples by Jacob Lawrence, Henry Ossawa Tanner, and Ernest Crichlow. (New York Times)

[Read More]

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Data Dip

(Price) Point Break

© Artnet Price Database and Artnet Analytics 2022.

As we continue to forecast how a recession will impact the art market, let’s look at some numbers, shall we? The graph above charts global auction sales at different price points in the first five months of the year. Here’s what it can teach us about the market’s vulnerability.

• Perhaps more than in any other five-month stretch in history, the strength of the art market in the first chunk of 2022 was buttressed by trophy works worth $10 million or more.
• That upper echelon accounted for 41 percent of all art sales during the period under review; an eye-popping 79 lots worth $10 million and up were sold.
• Compare that to the number of lots in this segment offered in 2019, the year the recession made landfall in the art market: 12.

• Perhaps more than in any other five-month stretch in history, the strength of the art market in the first chunk of 2022 was buttressed by trophy works worth $10 million or more.
• That upper echelon accounted for 41 percent of all art sales during the period under review; an eye-popping 79 lots worth $10 million and up were sold.
• Compare that to the number of lots in this segment offered in 2019, the year the recession made landfall in the art market: 12.

The takeaway?The first five months of 2022 were extraordinary because of the volume and quality of art on offer. (Do the names Bass, Ammann, or Macklowe ring a bell?) In all likelihood, it’s downhill from here, recession or not. But a top-heavy art market is always more vulnerable to a correction because collectors with flexibility will opt to hold onto their prize works and wait for a better climate in which to sell. In this way, market jitters can often end up becoming a self-fulfilling prophecy. 

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“She wanted to know if I had any gin. That’s one of my favorite things to drink.”

—Larry Gagosian on his first dinner with his 27-year-old now-girlfriend, artist Anna Weyant, in a longform profile detailing the cutthroat power plays behind the talented painter’s meteoric rise. (Wall Street Journal)

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Work of the Week

Jason Boyd Kinsella’s Summers (the elder)

Jason Boyd Kinsella, Summers (the elder) (2021). Photo courtesy of Phillips.

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Date:                 2021
Price:                HK$1.6 million ($208,658)
Estimate:          HK$150,000–250,000 ($19,200–32,100)
Sold at:             Phillips Hong Kong
Sale Date:         June 21

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The whiff of a recession did not dampen demand for work by up-and-coming artists at Phillips Hong Kong’s afternoon sale for 20th century and contemporary art this week. One artist who has found unlikely success is Jason Boyd Kinsella, a 52-year-old Canadian who began painting full-time just over two years ago following a long career in advertising. After being discovered on Instagram, the artist—who specializes in what he calls “psychological portraiture” that blends the aesthetics of Cubism and computer generation—had successful shows with Unit London and Perrotin. An acquisition by the Long Museum, and another by Hong Kong fintech entrepreneur Alan Lau, helped build buzz that pushed his auction debut in May to an eye-popping $441,000 (estimate: $7,000 to $10,000). While his sophomore outing failed to reach those dizzying heights, it would still be hard to call him a one-hit wonder.

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Thanks for joining us in the Back Room. See you next Friday.