Luxury Stocks Set for Revival in 2026 After Rollercoaster Year

Core Viewpoint - Optimism is growing for a second-half rally in Europe's luxury-goods sector, with signs indicating a potential recovery as third-quarter earnings improve, the Chinese market rebounds, and new creative directors are appointed [1][2]. Group 1: Market Sentiment - Analysts are increasingly positive about the luxury sector, with UBS's Zuzanna Pusz stating that the worst may be over, driven by recovering Chinese demand and heightened creativity in the industry [2][3]. - Luxury stocks experienced a decline of 9% through June 2025 but have since rallied by 12%, raising questions about the sustainability of this rebound [2]. Group 2: Sales Growth Projections - UBS projects a return to 5% organic sales growth for the luxury sector, aligning with JPMorgan's expectations for increased sales numbers for the first time in two years [3]. - HSBC analysts anticipate a proper reversion to growth for the industry in 2026, with all global regions expected to grow in the mid-single digits, significantly supported by China [4]. Group 3: Chinese Market Impact - Chinese consumers account for over 25% of annual luxury sales, with their purchases expected to grow by approximately 6% in 2026, a notable recovery from a 5% decline this year [5]. - The improvement in Chinese consumer spending is crucial for brands heavily reliant on this market, such as Moncler SpA and Swatch Group AG [5].