Hmm. A high-priced art market acts as a canary in a coal mine? Before the financial crisis??

“The ‘Canary in the Coal Mine’ of the Global Economy?
The rapid cooling of the global art market tends to precede or accompany the global economic downturn or financial instability. This is because the ultra-wealthy, the main buyers, sensed the subtle temperature changes in the global economy and adjusted their asset portfolio before anyone else. Just before the 2008 global financial crisis, the number of high-priced art pieces sold in the auction market increased from the second half of 2007, and the successful bid price fell below expected prices.

In contrast, the stock market collapsed in 2008. “The art market is the barometer that most sensitively reflects the flow of global liquidity,” said Ulrike Hoffman-Bukardi, chief investment officer at UBS Global Wealth Management. “The fact that money is being withdrawn from the market could be a sign that a crack is starting somewhere in the real economy.”

~ Recently, the global art auction market has been in a slump. It is in contrast to the simultaneous surge in prices of stocks, which are risky assets such as the S&P 500, and gold, which is a safe asset. The so-called “Everything Rally” dominates the global investment market. However, it is analyzed that art, which is an ultra-high-priced real asset, is moving in the opposite direction.

More Than $50 Million in Work Deals ‘0 Cases’
According to a report in the first half of this year by Artnet, a global art market analysis company, on the 9th, the total amount of global pure art auctions was $4.72 billion. It was down 8.8% year-on-year. This is a 40.9% drop compared to the first half of 2022, when the market peaked. The average successful bid price per work, a key indicator of the quality of the market, was also about $24,224, down 6.5% year-on-year. It was the lowest in the past decade. This means that both high-priced and mid- to low-priced products have lowered their price support.

Billionaires-led “trophy asset” transactions have plummeted. According to a report by Bank of America Private Bank, the number of transactions of works worth more than $10 million in the first half of this year decreased by 44% from last year. Compared to the first half of 2022, when the market was at its peak after the spread of COVID-19, it is down 72%. In the first half of 2022, 13 transactions of works worth more than $50 million were made in the first half of this year.

Even in the actual field, the cooling of the top market is clear. During the New York auction week in May, two of the six items submitted at a appraised price of more than $30 million did not find a successful bidder at all. The Grande tête de Diego (estimated $70 million) offered by Sotheby’s was bid for “0” cases. Andy Warhol’s “Big Electric Chair” (estimated $30 million), which was scheduled to appear at Christie’s, was withdrawn just before the auction.

Art has all the characteristics of illiquid assets. Transactions incur high fees, rely heavily on experts for valuation, and have a limited buyer base. Rapid monetization is difficult in various crisis situations. No matter how valuable the painting is, its value drops significantly if you cannot find a buyer during the upheaval and have to sell it at a bargain price, or even if it is impossible to move due to asset freezes.

On the other hand, the financial market has seen a rally of liquidity-rich assets this year. Global stock markets have seen major indexes hit all-time highs, and gold prices have surged as they are both safe and liquid assets. There has been an unusual situation in which gold (safe assets) and stocks (risk assets) rally at the same time, which have traditionally shown conflicting movements.

Major auction houses were hit hard. Combined sales of the world’s top three auction houses, including Christie’s, Sotheby’s, and Phillips, are estimated to have fallen by 6-9 percent year-on-year in the first half. The specific performance of each auction house was different. Christie’s total auction price in the first half was about 2.1 billion dollars, a decrease of only 1 percent year-on-year. In contrast, according to the Financial Times, Sotheby’s financial pressure continued, with its profitability deteriorating last year, increasing its pre-tax loss to 248 million dollars.

The art market is not the only one suffering from a slump. It appears to be part of a widespread contraction in the so-called “discretionary consumption” of the ultra-rich. According to the Korea Luxury Investment Index (KFLII) compiled by real estate consulting firm Night Frank, the index, which combined the market prices of 10 luxury items including art, high-end wine, rare whiskey and classical cars, fell 3.3 percent on average last year.

When looking at the detailed items, the decline in the art sector was the largest at 18.3 percent. The decline in collective assets such as wine (-9.1 percent) and rare whiskey (-9.0 percent) was also notable. Analysts say that it is not a change in preference for a specific asset group, but a result of strengthening the overall risk aversion tendency of the ultra-rich.

geopolitical risks from Trump
There are multiple reasons for the cooling of the art auction market. Analysts say that the biggest variable is the implementation of universal tariffs by the U.S. In April 2025, U.S. President Donald Trump announced a new trade policy that imposes a flat 10% tariff on imports from all countries into the U.S. Depending on the size of each country’s trade deficit, the government imposed “mutual tariffs” up to an additional 11-50%. This protectionist stance can increase psychological and physical barriers for assets that frequently move across borders, such as artworks.

The biggest confusion was whether to impose tariffs on art and antique items. According to U.S. trade regulations, art won (painting, sculpture, etc.) is an item that is exempted from import tariffs in order to protect “freedom of expression.” Even in the existing tariff table, paintings, prints, sculptures, and antiques for more than 100 years are specified as tariff-free. This is based on an international agreement that recognized the importance of cultural exchange.

However, the Trump administration implemented the tariffs on an unusual legal basis called the National Emergency Authority (IEEPA Act), which complicated the situation. It became unclear whether the phrase “all goods collectively 10%” included art without exception. This was a measure beyond existing trade norms.

Even legal experts were divided. Nicholas O’Donnell, an art lawyer in Boston, said, “This is a very unusual move