When War Breaks the Portfolio: Why Art Deserves to Be Considered a Hedge
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by Richard Mudariki
As I work in my studio on my latest body of work, news arrives of bombs falling again in the Middle East. The contrast between the quiet concentration of the studio and the violence unfolding elsewhere in the world is impossible to ignore. It reminds me why, in 2011, I began a body of work with my first solo exhibition in Cape Town titled My Reality. That exhibition explored the tension between the world we wish to inhabit and the realities we actually live in. A theme that has continued to shape my artistic practice ever since.
As an artist, a student of history, and someone deeply interested in socio-economic forces and current events, I have always asked myself an uncomfortable but necessary question: what is the role of art in times like these? My early studies in archaeology taught me that the objects a civilisation leaves behind often become the most enduring record of its existence. Art, more than almost anything else, becomes the evidence of how people understood their moment in history.
After more than 25 years working as an artist, and now entering what I would call the more reflective phase of life beyond 40, I increasingly find myself thinking not only about artistic legacy but also about economics, wealth, and the long-term value of cultural production. Like many people building careers and assets over decades, I pay close attention to the shifting structures of the global economy. In recent weeks, investors around the world have been confronted with a troubling reality: the traditional playbook for protecting wealth may no longer be working as reliably as it once did.
A recent analysis published on Moneyweb by Bloomberg’s Khuleko Siwele highlighted a growing concern among global investors. As geopolitical tensions escalate and energy prices surge, markets are entering a phase where the conventional hedges - government bonds, gold, and diversified stock portfolios - are behaving unpredictably.
For decades the logic was simple. When equities fell, bonds rose. When inflation climbed, gold offered protection. Yet recent market movements suggest that these relationships are beginning to weaken.
War and geopolitical uncertainty are creating a new economic environment, one that increasingly resembles the stagflation shocks of the 1970s: rising inflation, volatile energy prices, slowing growth, and central banks with limited room to stimulate economies. In such conditions, traditional portfolio strategies - particularly the classic 60/40 mix of stocks and bonds - begin to break down.
When this happens, investors begin searching for assets that operate outside the logic of financial markets.This is where art deserves serious consideration. Not because art is immune to economic cycles. It isn’t. But because art operates within a different value system altogether. Unlike equities, art is not priced based on quarterly earnings or interest rate expectations. Unlike bonds, it does not depend on central bank policy. Art is a finite cultural asset, whose value is driven by rarity, cultural significance, institutional recognition, and collector demand.
In other words, art belongs to a different economic ecosystem. Historical data from the global art market illustrates this dynamic clearly. During the global financial crisis, the art market experienced a sharp contraction. Global art and antiques sales fell to approximately $39.5 billion in 2009, a decline of around 36 percent from the previous year. Yet over the following decade the market recovered steadily, driven by new wealth creation and expanding global collector bases.
The COVID-19 shock of 2020 again tested the resilience of the art market. Sales declined by roughly 22 percent to $50.1 billion, but the contraction proved temporary. By 2021 the market rebounded strongly to $65.1 billion, and continued rising to $67.8 billion in 2022, one of the strongest years on record. More recently, the market has softened slightly under the pressure of higher interest rates and geopolitical uncertainty. Sales fell to around $65 billion in 2023, declined further to $57.5 billion in 2024, and have begun recovering again, reaching approximately $59.6 billion in 2025.
What these numbers reveal is not immunity from crisis, but structural resilience.
Art markets move differently from financial markets. Prices are less volatile on a day-to-day basis, partly because artworks are not continuously traded like stocks. Valuations are shaped by auctions, galleries, museums, curators, and collectors rather than by algorithmic trading or macroeconomic headlines. This slower rhythm creates a form of insulation from short-term market shocks.
There is another factor also worth noting. Increasingly, art is no longer viewed simply as a luxury purchase. Wealth managers and family offices now recognise art as part of a broader asset allocation strategy. Reports from institutions such as Deloitte and UBS show that art and collectibles are becoming integrated into wealth management portfolios, particularly among high-net-worth collectors seeking diversification beyond traditional markets.
However, my discussion must remain honest and grounded. A friend and former curator of the Sanlam Corporate Art Collection has always said to me, Richard art is not a perfect hedge. It is illiquid, transaction costs can be high, and the market is uneven. Quality matters enormously. A museum-level work by a historically significant artist behaves very differently from a speculative purchase driven by short-term hype.
Yet in periods like the one we are entering, where war, inflation, and geopolitical fragmentation are destabilising traditional financial assumptions, art begins to play an important role. Not as a quick-trading asset. Not as a daily hedge against volatility. But as a long-term store of cultural and economic value.
Art holds something that financial instruments cannot replicate: scarcity, narrative, and cultural significance. A masterpiece cannot be printed by a central bank. A historically important work cannot be diluted through stock issuance. Once it exists within the cultural record, it becomes part of a finite global archive. This is why art has always quietly accompanied wealth across centuries. From Renaissance patronage to modern collecting, art has functioned not only as aesthetic expression but also as a preservation of capital and legacy.
In moments of geopolitical instability, that distinction becomes clearer.
The real question therefore is not whether art replaces traditional hedges like bonds, gold, or cash. The more interesting question is whether art should be recognised as a third pillar of diversification - alongside financial assets and real estate - especially in a world where global instability appears increasingly structural rather than temporary.
If the current geopolitical climate continues to reshape the global economy, collectors and investors may begin to rediscover something the art world has always understood:
Art is not simply a market. It is a store of civilisation itself.
Richard Mudariki is an artist and cultural producer. He holds a Honours degree in cultural heritage management and museology from the Midlands State University.
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