Skip To Content
Bank of America Coronavirus Resource Center See details

Art Market Update

June 2020

Art Market Update image

At Bank of America, we maintain a sharp focus on the art market and on the collectors, dealers, auction specialists and institutions that make it function. We work closely with many of you across four pillars: art lending, art planning, consignment services and arts endowment management. In this update, you’ll find our latest thinking about the transformation underway in the art market, and considerations for collectors.

Talk to your advisor about how these trends and insights might be relevant to your own collection and plans for the future.

The Art Market’s Response in Three Phases

The art market tends to lag the stock market and the broader economy. Pullbacks are typified by a misalignment of buyer-seller expectations. We’ve had three major art market pullbacks in the last 30 years: the 2008–09 financial crisis, the 2001 bursting of the tech bubble (compounded by the 9/11 terrorist attacks) and the 1990–91 global recession. The two most recent pullbacks had V-shaped recoveries, while the 1990 collapse took nearly a decade to bounce back, partly due to higher interest rates. We expect the post-COVID-19 art market to avoid a steep collapse and forge a three-phased path ahead: The Bridge, The Adjustment and The Recovery.

The Fed responded quickly and aggressively to the Coronavirus
Sources: Bloomberg, Chief Investment Office. Data as of April 22, 2020. For illustrative purposes only. 
Past performance is no guarantee of future results.

The Bridge Phase (now through Fall). As the medical crisis wanes, local economies reopen and the world begins to spin again, we expect the art market will likely be supply-constrained  until there is more economic clarity. But don’t expect deep discounts in Phase I. During the last crisis, the total value of art sold fell 40% from 2008 to 2009.* This was driven by sellers refusing to accept lower prices from bargain-hunting buyers, not price depreciation. Expect a similar phenomenon through the summer as consignors sit on the sideline awaiting economic clarity, and auction houses, art fairs and galleries shift to digital sales channels to salvage some revenue. Perhaps counterintuitively, the few works that do come to market will likely be met with surprisingly stable demand as stimulative monetary policy and a bored, quarantined collector base continues to buy. While the summer auctions will likely have thinner offerings, previously negotiated guarantees and stable demand should keep price levels stable.

The Adjustment Phase (Fall through Spring 2021). Beginning this autumn, the number of works coming to market are expected to spike sharply and outpace demand in some segments, pushing prices lower. Cash-strapped galleries in need of liquidity, distressed sellers impacted by market volatility and consignors who’ve psychologically accepted lower prices will hit the public and private market. Demand—a function of collector sentiment—will ultimately be determined by the medical reality, stock market levels and buyers’ liquidity. But we expect prices to recalibrate slightly downward during this period. Prices on the few masterpieces that trade should remain stable, but hyper-contemporary and middle market works will likely see downward pressure. Phase II is the time for bargain-hunting.

The Recovery Phase (2021 and beyond). The art market’s deflationary period should end as capital markets strengthen, the corporate profit cycle normalizes and economic sentiment rebounds. During this period, economies will begin paying for their monetary and fiscal responses to COVID-19 through inflation. This should again drive capital into art (the Fed can’t print Picassos). Primary market contemporary artists—particularly young figurative pre-crisis market darlings—will lag more established artists. Middle market galleries and museum acquisition programs will likely take years to recover, and some will close. Well-capitalized mega-galleries should emerge stronger and the art fair calendar will likely shrink. We expect virtual sales rooms, online auctions and digital channels will boom, but ultimately the art market could return to its social, tactile roots in Phase III (vaccine willing).

Impact on Art Prices

Forecasted Impact of the Coronavirus on the Art MarketThis chart shows art price expectations by type of art across the art markets three phased response
Source: Bank of America Art Services June 2020

Three Big Art Market Trends

1. Art ecosystem adapts. The art market’s infrastructure is in the midst of an extreme retrenchment. Galleries, auction houses and museums have cut or furloughed staff and are pondering how to function in this new environment. Expect a wave of consolidation and closures—the galleries we’ve spoken to say revenue is off by 80%. The American Alliance of Museums (AAM) estimates that 30% of museums will not have the resources to reopen, and galleries tell us that business will be down 70% this year. We expect the most rapid, potent innovation cycle we’ve ever witnessed in the art market’s history. This means a more accessible, impersonal, transparent, slightly dreary, virtual art world in the near term.

2. Auction house strategy. Last year three auction houses sold themselves—Hindman, Bonhams and Sotheby’s. A battle for market share has eroded industry margins, and the age of social distancing has accelerated their move into new product areas and digital sales channels. Expect the live digital-hybrid auction model to be used for its major sales for the foreseeable future. You’ll also see a proliferation of eBay-style multiday auctions with the option to offer a buy-it-now price and significantly more lots sold via private treaty sale than under hammer. Expect creative alliances among auction houses (for example, Guardian and Christie’s in China) and with the private market (Sotheby’s Gallery Network). Finally, look for the houses to make strategic bets in fashion, retail and even financial services.

3. Rise (and fall) of digital. Social distancing has expedited the art world’s transition to digital sales channels. We first saw the digital acceleration in March as Art Basel Hong Kong launched an entirely virtual fair. Expect all art fairs to have digital sales rooms. Galleries tell us that virtual sales are 25% of live fairs. The new format creates more price transparency, which drives market efficiency and accessibility. Recent online auctions and digital art fairs have proven surprisingly effective with high sales and up to 40% of auction bids coming from new bidders. You might never see an in-person day-sale auction again. While the digital dream is now real, it is wanting; as a result, we expect the art market will transition to a hybrid digital/in-person world, once we are able.

A Look at the Most Recent Art Market Correction

The 2008–2009 financial crisis can help us think about our current environment. Global sales of art and antiques fell from $62 billion in 2008 to $39.5 billion in 2009 but returned to its pre-crisis levels by 2010*. The bounce-back was fueled by stimulative fiscal and monetary response similar to what we’ve seen this year. We expect the art market to take a similar path forward.

Global Art Market and Interest Rates
2008-2011

This graph shows the value of the global art market and interest rates from 2008 through 2011
Source: Art Basel UBS Global Art Market Report 2019.
Past performance is no guarantee of future results. Performance would differ if a different time period was displayed. Short-term performance shown to illustrate more recent trend.

Global Art Market and Interest Rates
2019-2022

This graph shows the value of the global art market and interest rates from 2019 into 2020 and projections from 2020 to 2022and rough 2011
Source: Art Basel and UBS Global Art Market Report 2020 and Bank of America Art Services (Projections), June 2020.
Past performance is no guarantee of future results. Performance would differ if a different time period was displayed. Short-term performance shown to illustrate more recent trend.

Four Tactical Considerations for Collectors

Top ten artists of 2019.
Source: Artnet 2020

1. Consider your art as a source of liquidity. As interest rates drop and markets turn choppy, take stock of your liquidity options. More collectors hold their art on the balance sheet and use it as a strategic source of capital to redeploy into investments. And because art is not priced daily, art loans offer lower margin call risk than a typical margin loan.

2. Consignment considerations. As you think about selling art, consider the benefits and drawbacks of your current options: hybrid auction formats, private treaty sales, online-only digital sales and gallery consignment. To help manage risk for our clients, we’re building optionality into consignment agreements to provide a release valve should the medical or financial crisis intensify.

3. Planning considerations. Appraisals are expected to adjust lower, which should in turn affect planning. Certain planning techniques are more efficient when interest rates are lower. For example, the Internal Revenue Service 7520 rate is issued monthly and reflects an assumed rate of return. Since the June 2020 rate is the lowest it has ever been (0.6%) it provides an opportunity to transfer even more wealth to the next generation.

4. Gifting and philanthropy. Aside from selling, collectors have additional options for their art: give it to family members or donate it to charity. Lower values affect both of these options. While no one likes lower values, they do allow a senior generation to transfer more wealth to the next generation at a reduced transfer tax cost. Conversely, depressed values (and appraisals) may lower charitable income tax deductions for donations of art. However, the ability to deduct cash donations was increased to 100% of adjusted gross income as part of the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), which dramatically increases the deduction for cash donations to art and cultural institutions.

Spotlight: Bank of America Arts and Culture

As a major supporter of arts and culture nonprofit organizations, Bank of America is remaining steadfast in its support of our partners during this unprecedented time.

We are fulfilling all commitments made to our nonprofit partners, whether or not they are open and/or programming has been canceled, digitized or postponed. This includes paying full stipends to all partners in Museums on Us®, honoring commitments to sponsor exhibitions and performances, and rescheduling loans of our collection through our Art in Our Communities® program. We will also provide additional funding for digital programming and to address the impacts of coronavirus on institutions.

To ensure we can deploy funds to meet the immediate needs of the arts sector, we made the difficult decision to cancel the Bank of America Art Conservation Project for 2020. We plan to re-open the application process in the fall, and make selections and grants in the first half of 2021. This will mark the 10-year anniversary of the program, which has thus far helped 175 projects in 33 countries.

We believe in the power of the arts and shall be with our partners through it all. To learn more about our arts support, please visit bankofamerica.com/arts.


A private wealth advisor can help you get started.

Find an advisor