Luxury Goods Sales Expected To Return To 2019 Levels This Year
A new report released in May says global sales of luxury goods have a chance of fully recovering to 2019 levels this year. Consulting firm Bain & Company estimates that there is a 30% chance that the luxury market will reach or exceed $ 340 billion in sales of high-end items such as clothing, handbags and jewelry. , which would be the most in two years.
This marks an adjustment from Bain’s previous forecast of a full recovery by 2022 or 2023. What has changed, according to the Boston-based group, are surprisingly strong economic rebounds in China and the United States. , in large part due to the rapid distribution of vaccines.
Some may question Bain’s optimism. After all, the luxury goods market saw its biggest annual decline on record in 2020, down 23% due to pandemic lockdowns and financial uncertainty.
But a recovery has already started. French luxury giant LVMH Moët Hennessy Louis Vuitton announced in April that it had returned to growth in the first quarter, with sales of $ 16.75 billion across its more than 70 brands. Fashion and leather goods in particular had an excellent start to the year, generating record sales of $ 6.7 billion, 37% more than in the same period in 2019.
Like Bain, I am very optimistic and believe that American and Chinese consumers are well positioned to maintain this momentum. Vaccines continue to be administered, albeit at a slightly slower pace than before, while stimulus controls helped disposable income in the United States jump to an unprecedented 29% in March from in the same month last year. More than $ 17 trillion is placed in U.S. commercial banks at a time when consumer confidence peaked recently before the pandemic.
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Asia to contribute $ 10.3 trillion in new spending by 2030
Chinese consumers have also shown incredible resilience. According to the National Bureau of Statistics, retail sales of consumer goods increased 17.7% in April compared to the same month in 2020, 8.8% compared to April 2019. As strong as this growth may seem , that’s a slight slowdown from February and March, when sales rose 33.8% and 34.2%, respectively, from a year ago.
Looking ahead, China is expected to contribute an additional $ 6.6 trillion to global consumption by the end of the decade, according to Hong Kong investment bank CLSA. When combined with four other major Asian markets – India, Japan, Indonesia and South Korea – the total amount of new consumer spending could reach $ 10.3 trillion.
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If this is correct, it could be very beneficial to the luxury goods market, which already depends on a strong Asian consumer base. As CLSA analysts write, Generation Z Asians – those born between 1995 and 2009 – represent the region’s largest consumer base through 2030 with nearly one billion people. They are wealthier and better educated than older demographic groups, and their spending patterns more closely resemble those of Western consumers as their incomes steadily increase.
One way to play the luxury boom
I believe that an attractive way to play the recovery of luxury sales is with our Global Luxury Goods Fund (USLUX). As its symbol suggests, USLUX is truly global, with half of the fund containing companies domiciled in the United States. The other half includes companies from Western European markets – mainly Germany, France and Switzerland – and Canada.
USLUX is well-diversified, with exposure not only to traditional luxury goods manufacturers (think LVMH, Burberry, and Prada) but also to automakers (Tesla, BMW, Ferrari), retailers (Costco, Home Depot) and even producers. gold (Barrick, Newmont).
Why are gold producers, who might ask? Jewelry makers are the second largest source of demand for physical gold after investment, placing gold miners at the forefront of the luxury goods supply chain.
USLUX changed its investment strategy on July 1, 2020 and since then the fund has significantly outperformed its benchmark, the S&P Composite 1500 Index. USLUX was up nearly 50% on May 14 when the index was in 35% increase.
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Do you want to learn how to invest in style? You can find everything you are looking for, from USLUX listing to historical performance, in Click here.
Please carefully consider the investment objectives, risks, fees and expenses of a fund. For this and other important information, obtain a fund prospectus in Click here or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Foreside Fund Services, LLC, Distributor. US Global Investors is the investment advisor.
|Funds||One year||Five years||Ten years||Gross expense ratio|
|Global Luxury Goods Fund (USLUX)||72.12%||12.12%||7.40||1.70%|
|S&P Composite 1500 Index||58.73%||16.15%||13.74%||N / A|
Expense ratios as indicated in the most recent prospectus. The total annual expenditure after reimbursement was 1.58%. The performance data cited above is historical. Past performance is no guarantee of future results. The results reflect the reinvestment of dividends and other profits. During some of the periods, the fund had spending limits, without which the returns would have been lower. Current performance may be higher or lower than the quoted performance data. The capital value and return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The return does not include the effect of direct charges described in the fund’s prospectus which, if any, would reduce your total returns. Get up-to-date performance data up to the most recent month end at www.usfunds.com or 1-800-US-FUNDS.
Originally posted by US Funds, 05/27/21
The fund changed its investment strategy on July 1, 2020. Prior to that date, the fund invested in a diversified equity portfolio of equity-linked securities of companies in the S&P Composite 1500 Index, with a focus on companies achieving a high return on invested. capital metrics and focus on mid-cap companies. Different investment strategies can lead to different performance results. The fund’s performance for periods prior to July 1, 2020 reflects the investment strategy in effect before that date.
Investing in mutual funds involves risks. A loss of capital is possible. Equity markets can be volatile and stock prices may fluctuate in response to industry risks and other risks as described in the fund’s prospectus. Investments in foreign and emerging markets involve special risks such as currency fluctuations and less public disclosure, as well as economic and political risks. Companies in the consumer discretionary sector are exposed to risks associated with fluctuations in the performance of national and international economies, changes in interest rates, increased competition and consumer confidence.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be suitable for all investors.
The Consumer Confidence Index (CCI) is a survey, administered by the Conference Board, that measures how optimistic or pessimistic consumers are about their expected financial situation. The S&P Composite 1500 combines three main indices, the S&P 500, the S&P MidCap 400 and the S&P SmallCap 600, to cover approximately 90% of the US market capitalization.
Fund portfolios are actively managed and holdings may change daily. Holdings are reported at the end of the most recent quarter. Holdings in the Global Luxury Goods Fund as a percentage of net assets at 03/31/2021: LVMH Moet Hennessy Louis Vuitton SA 5.80%, Tesla Inc. 4.54%, Costco Wholesale Corp 4.29%, The Home Depot Inc. 2.67%, Prada SpA 0.88%, Burberry Group PLC 0.85%, Ferrari NV 0.71%, Barrick Gold Corp. 0.38%, Newmont Corp. 0.35%.