By Plummer, Robert
Art Business News , Vol. 27, No. 11
As consumers' 401K and mutual fund portfolios grow, dealer sales are increasingly tied to the stock market
Though the economy is humming and dealers are enjoying the increase in luxury spending by consumers, they are all closely focusing on one strong economic indicator--the stock market. While the occasional dips in the market are only chips in the armor of a continued strong art market, art dealers, gallery owners and artists themselves can't help but notice a shift. Art buyers are getting younger, and the attention they pay to the stock market is growing.
Take Ethan Karp. He has little interest in the stock market, but he remembers the market's dive two days prior to the 2000 Chicago Art Fair vividly. Karp, associate director for the O.K. Harris Gallery in New York, envisioned a successful show as Chicago has always had a friendly eye, and pocketbook, towards his gallery's work. However, Karp said the stock market's decline leading into the Fair clearly hurt O.K. Harris' bottom line.
Karp's assessment confirms analysts' ideas that as consumers' 401k and mutual fund portfolios grow, the direction of the stock market will be tied more and more to the art world.
"In my 14 years in the business, our sales have never moved in accordance with the market, but the 200 point drop before the Chicago show clearly hurt our sales," Karp said. "In the past, people we dealt with didn't care if the stock market dropped. Now we have people who are buying who rely heavily on the market."
Karp said the stock market's weakness resulted in at 25 to 40 percent drop in business at the Chicago Art Fair. Still, Karp said he will take the occasional decline because the upside is younger art buyers, whose bank accounts have been bolstered by dot.com stock gains, a thriving real estate market and the overall continued strength of a U.S. economy that keeps chugging along.
A New Generation of Buyers
The robust economy has resulted in more than seven million people worldwide now classed as high-net-worth individuals, with assets of $1 million or more. A lot of that wealth has been thrust upon a new generation, who after purchasing a house and a new car car, look to fill their walls with art.
But the younger buyer boom is far from limited to millionaires. Karp said younger customers at art shows and in galleries have money to spend. However, they do so differently than more mature clients.
"We see a lot of young couples coming in and buying to fill their home with art, instead of buying that one piece for $40,000 that we saw more of in the past. Younger buyers come in and buy five to eight pieces for $40,000. That's what makes up their spending."
Karp points out that young buyers are tied tight to the fluctuations of the stock market because many of the impressive balance sheets aren't connected to actual wealth. "They are psychologically keyed into the market and will be for some time."
Bottom line, a lot of the nouveau rich are wealthy on paper only. When they see a market downturn, many immediately think of their 401K or mutual funds.
Market fluctuations are also felt at the more affordable end of the art market, but its influence is more muted, according to Charlie Kimbell, with Wild Apple Graphics in Woodstock, Vt.
Kimbell said while the stock market's performance hasn't been as strong in 2000 as it was in 1999, times are good for many dealers who concentrate on the $200 per work and under market.
Wild Apple Graphics sales have been up each month compared to last year's monthly totals and Kimbell looks for sales to continue to climb into the new year.
As for trends in the art itself, Kimbell said while many dealers are tying to get away from florals, the prints continue to sell well. He said pieces with stronger, deeper colors also a customer favorite.
"We had a good year last year and this year is even better," Kimbell said. …