Asset prices have recovered a fair amount of the ground they ceded after the launch of broad-based tariffs by the U.S. on April 2. However, a wave of optimism (justified or not) has swept through markets over the past couple of weeks on hopes that we are past peak policy uncertainty. After a strong start to the year, the S&P 500 is now just down around 4 percent YTD after hitting a trough of -14 percent in mid-April. The Euro Stoxx 50, which remained much more resilient than U.S. indexes, is now up almost 8 percent. The VIX sits at 24 after peaking at 49. Policy actually remains as uncertain as ever, which continues to depress the dollar and power demand for gold, but we seem to be at least taking a small break from the panic.
Our FSW Markets All Luxury Index is now up 11 percent on the year. Like other asset classes, luxury stocks have been on a rollercoaster. Our 18-company, cap-weighted index was up over 20 percent in February on hopes that 2025 would produce a better year for the industry, underpinned by strong U.S. growth, making up for persistently weak demand onshore in China. The bursting of those hopes drove the index down to a 3 percent decline by early April. At the moment, the index has recovered about half of its post-tariff losses and is up 11 percent.
Eight of the index’s 18 company constituents are up on the year. This list comprises: L’Oréal, Hermès, EssilorLuxottica, Moncler, Tapestry, Richemont, Ferrari, and Ralph Lauren. Industry bellwether LVMH (which has again passed Hermès as the largest public luxury organization in the world by market capitalization) is down over 20 percent, having failed to make up any ground after reporting a 2 percent dip in Q1 revenue.
Despite some bounce back in investor sentiment, forward guidance remains grim. Our own FSW Markets forecast is for a 5 percent decline in full-year sales growth. This forecast is down from our January 2025 vintage, which was for a 4 percent increase over last year. The industry contracted 4 percent last year following years of strong, post-pandemic growth well above historical norms for much of the industry.