Wealth

Sotheby's CEO: Policies, not the president, boosting art market

A Sotheby's employee walks past Luciano II painted in 1976 by Franz Gertsch.
Charlotte Ball | PA Images | Getty Images

While the art market has shown signs of strength since the election, Sotheby's CEO Tad Smith credits Donald Trump's policies more than Trump himself.

"It doesn't matter who is president," he told CNBC. "What matters is whether the policies are pro-growth. Whether they're friendly for taxation, whether they're friendly for economic development.
As long as we have that, I think people will feel better."

Growing confidence in the art market helped lift Sotheby's earnings in the fourth quarter and helped lift the company's share price 15 percent Monday. Its share price has doubled over the past year.

Investors are betting that the art market slowdown, which began at the end of 2015 on China fears, may be reversing and that Sotheby's will be better able to capitalize on the growth under Smith's leadership and after changes at the company.

Sotheby's kicks off Wednesday its important London sales, offering up more than $300 million worth of art for auction. The sales will be a big test of the market after Trump's inauguration.

"We feel good about the art market," Smith said. "We think we'll have a big week in London this week and next week. The entire art market does. One of the things I look for in discretionary sales is the supply for bigger pieces loosening up. We're seeing that both in London and we see a lot of activity in the pipeline. And that's a good sign for the market."

Still, there could be some downside to tax reform in Washington. The border adjustment tax could hit American buyers purchasing art overseas.

"We're not sure what's going to happen," Smith said. "But one way to think about it is this: in 2016 about 6 percent of Sotheby's sales were in New York but from art that was imported to New York and sold to Americans. It's an interesting question."

The biggest lot Sotheby's is offering up in London is a painting by Gustav Klimt that could sell for $45 million. The 1907 painting, called "Cottage Garden" comes to market amidst feverish interest in Klimt after Oprah flipped a Klimt painting for $150 million, after buying it in 2006 for $87.9 million.

When asked about the sudden obsession with Klimt, and why he's the "hot" name among collectors, Smith said: "Well, this particular painting is amazing. Sometimes it's a matter of what's coming to market. It's not that they weren't hot. It's just that they've been hidden for years. That's a fresh painting. It's a beautiful painting. The artist is iconic. And that particular piece is from an iconic period of the artist's work. When they come up, everyone gets excited."