What Donald Trump Means for the Art Market

It is a bit of a silly task to try to respond to unexpected events with projections about second- and third-order domains like the art market. Prognosticating is further complicated by the unusual nature of the Trump victory. Donald Trump is essentially an independent who won the White House without the Republican party.

What Trump believes and the policies he intends to pursue remain unclear to even his advisors let alone the public or policy makers. It is important to remember that Trump is very comfortable with changing any position he has previously held. Even, or maybe we should say, especially, his own most ardent supporters don’t seem to take literally his promises of a physical wall, mass deportations or a total ban on Muslims entering the country.

But in the first reckonings of what might affect the art market, there are at least two important issues worth acknowledging. The first is that global instability and doubt will tend to accelerate the process of money going into alternative stores of value. In plain english, there’s good reason to believe buyers will continue to shift cash into art and jewels instead of financial instruments like treasury bonds or, even, equities.

The second issue is a macroeconomic shift toward inflation. Low interest rates have been presumed to continue indefinitely. But already some of Trump’s likely advisors are calling for aggressive action on interest rates and other policy moves that will make inflation a priority over other goals. Economists further point to Trump’s signature immigration stance and the potential for a large stimulus package as signs that inflation will likely pick up as labor markets tighten from the effects. Trade restrictions too will also drive inflationary pressures.

Neither of these trends is necessarily bad for the art market, especially in the context of a political regime that is unlikely to raise taxes. The wealthiest sector of the global economy will continue to accumulate more cash than it can consume or productively invest. That money will seek a safe haven, especially if inflation erodes its value as cash or other investment yields don’t keep pace with inflation.

The question will continue to be whether owners of art will sell rather than whether buyers are waiting to compete for their art objects. (Again, if there are better returns to be had in other types of investments the art market could suffer too.)

Having said all of that, it is far too early to know what will happen next week during the New York art auctions let alone in the years to come. Though, if there is anyone involved in the art market who has a shot at having a glimmer of insight into Trump’s next moves, it might just be dealer Robert Mnuchin. His son was Trump’s campaign finance chair and has been suggested as his pick for Treasury Secretary.