On Wednesday, the Dow Jones Industrial Average closed above the 20,000 mark for the first time in history.

What, if anything, does this mean for the art market in the near- and medium-term?

What does the Dow's rise say about the underlying economy? And lastly, how do those factors influence the behavior of art market actors?


  • ​In the case of purchases via the art trade, VAT accounted for 20% in UK, while the tax rate in Switzerland was generally 8%. 
  • ​It can be more tax-advantageous for art collectors to act as commercial traders rather than private collectors (keyword: profit and loss account).
  • Tax depreciation (AfA) on art is only possible up to a purchase price of €5,000; in the case of purchase prices, the financial administration assumes value or value growth.
  • Gifting and inheritance of art can be tax-exempt at 100% or at least 60% under certain conditions.
  • An art foundation should be well thought-out, since the personal and financial obligations are substantial in the long run: not only for the collecting collector, but also for the offspring.
  • An art insurance is to be considered for risk cover during hanging, storage, exhibition, loan and transport.

Thompson hypothesized, that the high end of the market could be impacted indirectly, through increased confidence on the part of potential sellers.

Dealers and auction house specialists have complained that uncertainty has led to a lack of quality material being brought to market, despite claims of persistent demand for those works.

A roaring stock market could convince sellers that their works will indeed be able to achieve above-estimate results in a saleroom environment.

That preference stems in part from the fact that art production faces a strong headwind from the Trump administration, which has proposed eliminating the National Endowment for the Arts and the National Endowment for the Humanities.

Those entities help fund some of the smaller museums and grassroots institutions supporting emerging, younger, and often more radical voices.

If that segment of the cultural infrastructure collapses, Mr. Levin said, galleries will find it harder to identify and bring on new artists.

This is welcome news.

Over the past 18 months, the art market, like the economy at large, has been characterized by uncertainty.

This has led to a to tightening of the supply for top-end consignments at auction and a retreat from riskier portions of the primary market - particularly emerging art.

The wealth effect will have different impacts at different tiers of the market.

It will likely firm up the lower end of the art market, said Don Thompson, economist and art market commentator, as younger collectors feel more secure in their jobs and the future value of their portfolios.

By contrast, the ultra-wealthy tend to feel wealthy all of the time, so he predicts little impact on their buying habits.

That said, the immediate impact of a stock market bull run is that investors feel richer. The so-called "wealth effect" tends to boost spending, whether it's on clothes, real estate, or art.

And since ownership of stocks is concentrated among the wealthy (according to one analysis of Federal Reserve data, the top 10% of equity holders in America own 87% of stock assets), that wealth effect is being felt by the same group of people already predisposed to buying art.

The stock market run-up theoretically reflects optimism in the economy's prospects, manifested in increased appetite for risk and growing confidence in firms' future earnings.

While firms are likely to benefit from President Donald Trump's aversion to regulation, this week's Dow record has stocks valued at a historically high multiple: on average, nearly 21 times their prior 12 months' earnings.

Todd Levin, director of Levin Art Group, said he sees the impact on the art market coming less from a notched record in the stock market and more from expectations that the Trump administration will cut taxes for the wealthy and favor business interests.

He predicts the current trend of stronger demand for blue-chip and established mid-career artists to continue, as collectors invest in the art market's relatively safer assets.

"The landscape's going to wither a bit," he said. "It's going to be a little more conservative." The people who buy at top of the market are already rich, and getting richer doesn't change much," he said.

James Jarvis dow

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