Shares of European luxury goods companies are rebounding after a weak year as investors hope that China’s stimulus measures will support the economy and spur spending.
Shares of luxury companies remain in their best performance since February, as optimism appears to be returning following the Chinese government’s recent efforts to support the economy. The Goldman Sachs basket that tracks the sector rose more than 8% in December, narrowing its year-to-date decline to just 1%.
Chinese consumers account for nearly 15% of the global luxury goods market, and future economic stimulus could cause stock prices to rise. Another potential boon for luxury goods demand next year could come from the United States, where President Donald Trump’s economic deregulation and tax cut plans could lead to higher consumer spending.
“China and the US remain important short-term catalysts for many luxury companies,” said Dora Vukručková, portfolio manager at Robeco Switzerland. He said in an interview that the exact timing of the economic recovery is “still uncertain,” but “we are positive about both.”
It’s been a tough year for LVMH Moët Hennessy Louis Vuitton (LVMH), the world’s largest luxury goods stock. The company was Europe’s largest listed company before being overtaken by pharmaceutical company Novo Nordisk.
LVMH stock has fallen 14% since the beginning of the year, its worst performance since the global financial crisis. The company’s stock currently trades at a trailing 12-month forward price/earnings ratio of 22 times, below its average since 2018 of about 25 times.
