Young Research’s Luxury Goods Index is a modified market-cap weighted index of some of the world’s most prestigious luxury brands. You would recognize many of the names in the index. The components include Tiffany’s, Louis Vuitton, Hermes, Bulgari, and Southeby’s among others. No single stock accounts for more than 20% of the index. Our luxury goods index provides a real-time snapshot of the health of the high-end consumer.
Why should you care about the health of the high-end consumer?
The high-end consumer has become vital to both U.S. and global economic growth. In 2012, the top 5% of earners were responsible for almost 40% of U.S. consumption. That is up from 27% in 1992. Consumption accounts for about 70% of U.S. GDP so the top 5% of income earners affect about 28% of GDP.
When high-end consumers spend freely, economic growth often accelerates, and when they tighten their wallets, economic growth usually falters.
Today, Young Research’s Luxury Goods Index is sending a signal of caution. The uptrend that began during the last recession has ended and luxury goods stocks look like they are breaking down. If luxury goods spending follows luxury goods stocks, as is often the case, economic momentum may be poised to slow.
Jeremy Jones, CFA
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