What the Luxury Sector Might Be Telling Us
Has the fevered pursuit of luxury seen its “last hurrah”?
by Bob Stokes
Updated: June 01, 2023
The pursuit of luxury tends to go out of fashion when the public's mood turns pessimistic.
However, when people are highly optimistic about the future, the opposite is true. For example, back in June 2007, the Associated Press noted:
Luxury Goods Boom Goes Over the Top
Forget about the $350 stilettos. Shoes with status these days come with $1,000 price tags. And $600 handbags have become so bourgeois. A-listers don't want to be seen with anything costing less than $5,000.
Yet only three months later there seemed to be a stark shift, as this September 2007 New York Times headline reported:
Suddenly, a Hesitation About Splurging
Within a month the Dow Industrials had peaked and slid into a deep bear market.
This bit of history about luxury is mentioned because one might wonder if a similar scenario is playing out again here in 2023.
As recently as April 24, a Bloomberg headline read:
LVMH's Market Value Exceeds $500 Billion, a First in Europe
As you probably know, LVMH is a major luxury goods company based in Paris. Subsidiaries include Louis Vuitton, Christian Dior and Tiffany & Co. – just to name a few.
Shares of LVMH rallied strongly in Q1: in turn, there was much fanfare about founder and chairman Bernard Arnault becoming the world's richest man.
But the latest news has a different tone.
On May 24, Fortune magazine said:
World's richest man sees $11 billion in wealth wiped out after stock rout in European luxury goods
Is this just a temporary setback... or are we in the early stages of a shift away from the pursuit of luxury?
Murray Gunn, Elliott Wave International's Head of Global Research, shared this May 26 chart and commentary from our Interest Rates Pro Service:
A good proxy for the luxury sector is the relative performance of the French CAC 40, which is dominated by luxury goods stocks ... Its outperformance started when the helicopter money started being thrown about by central banks during the Covid pandemic. Now that is coming to an end and luxury's last hurrah seems to be too.
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