When it comes to investing during a recession, many investors look to traditional equities or bonds. However, fine art may be an overlooked option that deserves a closer look. Here are four reasons why:
1. Outperformance during the last recession: During the 2008 financial crisis, fine art outperformed the S&P 500. From 2005-2009, while the S&P declined by an annual rate of 0.1%, art increased by 3.3%. This comparison demonstrates that art can be a strong performer during a recession.
2. Lack of correlation with equities: Unlike many traditional assets, art has a slight negative correlation with equities. This means that when the stock market is down, art prices may remain stable or even increase. This lack of correlation can help to build a diversified portfolio of assets.
3. Faster recovery time: A report by Deloitte and ArtTactic, which analyzes the performance of the art market from 2007 to 2012, states that during the recovery period from Q2 2009 to Q2 2012, art prices rebounded strongly, growing by 75%, while the S&P 500 grew by 57%.
4. Historical trends suggest that works from the Artprice 100 index, which includes the top 100 artists in the global art market, tend to outperform the overall art market during a recession. For example, during the global financial crisis of 2008, the Artprice 100 index declined by only 4.5%, while the overall art market fell by approximately 10%. This resilience can be attributed to the fact that the Artprice 100 represents well-established artists with strong demand, which makes their works more resistant to economic downturns.
At Freeport, the art offered on our platform is blue-chip fine art, the type that tends to perform better during economic downturns. Our collection includes blue-chip artwork from iconic artists. Our clients have the opportunity to invest in fractional ownership of these works, making it easier than ever to diversify their portfolio and invest in alternative assets.
In conclusion, fine art can be a smart investment during a recession. With its outperformance during the last major recession, lack of correlation with equities, faster recovery time, and tendency for high-end pieces to perform better, it's an option that investors should consider. At Freeport, we offer a range of high-end art for fractional ownership, providing an accessible entry point to this exciting asset class.