Last week was for equity markets marred once again by a high level of volatility, with luxury stocks being no exception.
The previous Monday could basically be best characterized as a disastrous trading session, fortunately it was followed by a noticeable recovery which paved the way for additional weakness on Friday.
The general malaise reverberated through Monday May 20th, another really negative session, at least for Europe. In the last 5 days though it was mostly American luxury names who under-performed, partly because of the additional trading time on Friday evening, when lots of investors offloaded some of their holdings before the week-end.
Readers may notice from our chart how even during an overall positive week tensions abounded. Some excellent quarterly results to a certain degree bolstered the market, the spike in Ferragamo stock serves as a remainder of what we are talking about, on the other hand though many stocks appear mired in what know can be safely defined as a correction.
A new chapter in the ongoing trade war between China and the US, this time involving tech giants like Alphabet, Huawei and others is weighing heavily on luxury, a segment of the market strongly tied to the economic cycle. Unfortunately an immediate solution to the global woes doesn’t seem to loom over the horizon.
Quite a few times we mentioned how at their peak luxury stocks discounted high growth expectations for 2019. If forecasts had to be trimmed down the road, there would be ample room for additional losses. Overall the risk/return inertia right now seems more favorable to the former rather than the latter.
In the meantime investor mood appear quite idiosyncratic, with heavy and fast rotations in and out of single names thanks to a highly volatile news and sentiment flow, dispersion also is further increasing. When markets decline though the increase in correlation is quite visible with liquidity being taken out of even the strongest companies in this sector.
|Company||Performance YTD||Stock market|
|Estee Lauder||28.84%||New York||up|
|Ralph Lauren||8.75%||New York||down|
|Capri/Michael Kors||5.43%||New York||down|