The most negative week for the luxuy sector in 2019

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The previous week marked probably the most negative for the luxuy sector in 2019. This segment of the market was significantly impacted by the return of the  fears surrounding the global economy. Triggering the sell-off on Friday 22nd  (Monday 25thin Asia) were worse than expected European data particularly in France and Germany.

The spike in the fear gauge ignited what is a fairly typical reaction for this sector, which saw a vast increase in their beta to the general market. This type of companies generally speaking can outperform when the economy is really strong and also when equities as whole are stagnant, due to a strong alpha displayed in  those scenarios. The dynamic though becomes markedly negative when things go south.

Among our group of 20 stocks 16 saw more or less significant declines. Among them Ralph Lauren and Tod’s managed to wind down the week pretty much unchanged while Tiffany and Prada rose. The latter though just enjoyed a partial rebound after a disastrous week, a rebound which by the way came to an abrupt end on Monday 25th. On the other hand the previous Friday it was Ralph Lauren turn to get trounced more than 3%, offsetting the gains of the previous sessions.

Generally speaking, in a reversal of what was witnessed during the previous days, the discretionary consumer sector was a major contributor to the general under-performing. This is definitely not an entirely unexpected development as we are talking about a segment of the market which is generally more volatile than high end luxury names. Investors found a strong exception in Tiffany, thanks to a good quarter and  a bigger focus on their own domestic market rather than the humongous but marred by hazy prospects Chinese one.

Once again French giants did provide us with some relative stability, on the other hand German luxury car makers were affected by the disappointing economic news.

Finally the strong decline registered by Moncler stock, triggered by the sale of the 4,8% stake owned  by the French fund Eurazeo (which by the way booked a handsome profit) represents an interesting case: is the decline just a temporary blip or it could instead represent the inception of a prolonged phase of less positive momentum for this stock? Time will tell.

CompanyPerformance YTDStock Market
Ferrari32.29%Milano
Tiffany28.20%New York
Estee Lauder 22.60%New York
Christian Dior22.04%Paris
LVMH 21.86%Paris
Moncler 21.02%Milano
Hermes 19.84%Paris
Kering19.46%Paris
Ralph Lauren16.21%New York
Capri/Michael Kors15.24%New York
Richemont 11.56%Zurich
Porsche 7.63%Frankfurt
Burberry6.17%London
Ferragamo5.78%Milano
Brunello Cucinelli2.66%Milano
Tod's1.55%Milano
BMW-2.25%Frankfurt
Tapestry/Coach-8.36%New York
Prada-11.05%Hong Kong
Tesla -20.51%New York

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