The previous week was nothing short of fantastic for luxury stocks. Only 3 companies, in the group of 20 we track, saw a weekly decline, in what ended up being the best 5 days streak since the beginning of 2019. On top of that a plethora of companies advanced way more intensely than their domestic market and benchmark.
Luxury companies were riding high on a wave of general improvement among developed equity markets, a recovery though that was particularly impressive in China.
The second largest economy in the World enjoyed an impressive surge triggered by good manufacturing data, vastly exceeding expectations, and by the news of apparent progress in the direction of a comprehensive trade treaty with the US. The way luxury stocks reacted to these developments was, as a matter of fact ,almost textbook case material : in a risk-friendly environment sparked by China, luxury stocks increased their correlation with the latter on their way up.
Once again a scenario of generalized strength, but with a clear Chinese over-performance, proved to be the best possible world for this type of companies. As a matter of fact the last 5 sessions in the US wound up the best first quarter for equities in a decade.
So what lies ahead? Investors can look at the future with more than a modicum of optimism, even if the caveats we previously mentioned still hold. For instance we can’t ignore how all the French luxury majors, a relative safe haven for this sector, are trading at their historical highs or close to them.
Looking ahead we cannot forget that future performances are heavily reliant on a fairly nebulous global economy where even last week data were not uniformly good. Disappointing figures emerged about US consumption and inflation. Last but not least a chaotic Brexit still looms over the horizon.
In our view focusing on quality, while avoiding excessively stretched valuations still remain the right approach in the luxury segment, keeping at the same time in the back of our mind that rapid, unexpected bouts of volatility are not that unlikely.
|Azienda||Performance YTD||Strock market|
|Estee Lauder||27.25%||New York|
|Ralph Lauren||25.34%||New York|
|Capri/Michael Kors||20.65%||New York|