Winning investment strategies have shown that forty percent of a portfolio can be found in an individual’s researched comfort zone, which typically includes varying amounts of stocks, bonds, and/or real estate. More and more often, the remaining 60% can be seen almost equally divided between dividend stocks, physical precious metals, and a new but popular entry, modern art. It’s been a favorite investment for the wealthy for centuries, but new investment companies are buying modern art, breaking its value into tranches, and treating the investment like a mutual fund.
Michael Hartnett, Bank of America’s Chief Investment Strategist, recently declared that stock returns could become lackluster moving forward, because we have hit a “secular turning point” on inflation. He suggests that real estate, commodities, and collectables like modern art, are likely to outperform customary investments over the next decade and demand increased consideration.
Larry Fink, Blackrock’s CEO suggests the same inflationary concerns, but identifies real estate and contemporary art to be high priority considerations, while Steven Wieting, Citi Private Bank Chief Investment Strategist & Economist notes that since 1985, contemporary art has outpaced most other asset classes. Further, that the broad art market exhibits low or flat correlation with other asset classes and therefore, could potentially improve portfolio diversification.
Inflation concerns have historically led investors to increase their precious metals holdings. Our country’s last MAJOR bout with high inflation occurred in the 1970’s. From 1973 to 1979, energy shortages and oil price shocks drove average annual U.S. inflation up to around 8.8%. During those six years, gold in particular shined brightly, generating an impressive 35% annual return. It takes time for inflation to respond to major economic events like a pandemic, suddenly surging unemployment, and rising energy prices, but the response continues to build. After trading down or sideways for most of 2021 and 2022, gold surged 14% between November 2022 and February 2023. As we close in on the end of the year, a similar surge appears to be occurring once again and growing global conflicts have the potential to exacerbate and invigorate some financial markets, particularly those within the 60% already being discussed.