Investment-grade art and antiques have done tremendously well over the last 10 to 15 years. The worst case scenario seems to have been about a doubling in value over that time – with many areas within the asset class tripling or even quadrupling. But a classic mistake many investors make is projecting past returns forward indefinitely. In other words, just because art and antiques have generated excellent returns over the past decade, it doesn’t mean they are destined to outperform over the next decade. So what, if anything, are we able to divine about their future returns? There are a few indicators that we can assess to give us a reasonable idea of their future performance.
First, I think it highly probable that precious metals – gold, silver and platinum – will be higher in the coming years. This trend will be primarily driven by flight to safety demand caused by inevitable future financial sector disruptions. Granted, this will only tangentially impact the pricing of antiques, specifically those that contain precious metals. But it will be an important contributing factor nonetheless.
High-end raw materials are another element that is sure to become dearer in the future. Honduran mahogany, Ceylon sapphire and British Columbian nephrite jade are just a few examples of the varied luxury raw materials often found in investment-grade objets d’art or antiques. These materials – and many others as well – are simply not as readily available in good quality and sufficient quantity anymore. The low hanging fruit – sources easily and cheaply exploited – has already been plucked clean long ago. While I don’t think there will be widely publicized shortages of luxury good constituents per se, I do believe there will be a slowly growing realization among the knowledgeable that they are no longer abundant. Consequently, one can expect the smart money to gradually begin accumulating art or antiques that use these materials, driving up prices in the process.
It is also obvious that the global economy is severely unbalanced in the current age. At times like this I like to paraphrase U.S. economist Herbert Stein who said, “Trends that cannot continue, will not continue.” However, while a financial crisis usually ensues from a prolonged period of market distortion, it also true that there will always be a day after – a time when the global economy is on solid footing again. When one invests in art and antiques, this is implicitly the scenario one is planning for – not the crisis, but the inevitable recovery. When people have money to spend again, they will undoubtedly want beautiful, rare and artistic items.
The final aspect that bodes well for the outlook in the art and antiques market is the growing trend of automation. In the future, factories will churn out massive amounts of consumer goods cheaply and quickly. In addition, 3D printers will be found in almost every home. Today’s ultra powerful computer processors are very good at mathematically intensive computations, but fail miserably at mimicking the human mind. This shortcoming of computer AI is even more apparent in the artistic space. As they are now, computers are simply incapable of conceiving of new ideas or amending existing concepts. Therefore, it stands to reason that those things that computers can create will become common and affordable while those things that only skilled humans can make will become scarce and highly prized. The creative endeavors of mankind will be revalued relative to everything else, which will just be “stuff.”
So even though the prices of art and antiques have already risen considerably, I believe it probable that this is just the start of a much broader trend. Rare and highly sought after, art and antiques will be widely and avidly collected in the years to come. The march of time will only serve to emphasize their positive qualities. In my opinion, prices will rise for most, if not all, categories of this underappreciated asset class.
