Julius Baer downgrades luxury sector

Swiss asset manager Julius Baer has decided to downgrade the luxury segment to underweight, stressing market weakness.

“Various indicators that reflect the state of the luxury sector (e.g. equity prices of auction houses, Swiss watch exports and the likes) show that the segment is seeing further headwinds. This goes in line with consumer confidence on almost record-high levels and the macro picture partly weakening,” said Christoph Riniker, head of Equity Strategy Research at Julius Baer.

“As a consequence, we see continued weakness in the global consumer durables & apparel segment, of which more than 50% belongs to luxury. While valuation looks ok, prices are rolling over and the relative performance is trapped in a range,” he added.

The overall consumer discretionary sector has been downgraded to neutral. But Riniker believes a good spot remains affordable luxury that is not dependent on a few regions and that can still perform nicely due to the lower prices according to him.

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