Sales of Luxury Jewelry, Watches and Yachts at Risk as Stock Market Panics
Spending on watches, jewelry, boats and other luxury goods could tumble because of the recent stock market jitters, according an analysis from Goldman Sachs.
Declines in stock prices since their peak last September could reduce luxury spending by wealthy spenders and shave a half a percent from the gross domestic product in 2019, according to a paper by Goldman Sachs economist Daan Struyven.
Struyven said that the so-called wealth effect — the theory that personal spending follows stocks — has become stronger in recent years as equity holdings have tripled as a share of disposable income.
The impacts of wealth effects are especially strong on the luxury sector, he said, because the wealthy own most of the stocks and "we find evidence that spending on luxury goods largely purchased by wealthy households is highly sensitive to stock prices."
Specifically, he said spending on jewelry and watches, along with pleasure boats and pleasure aircraft, is especially sensitive to stock market moves. A 10 percent increase in equity prices, for instance, led to a 6 percent increase in spending on jewelry and watches and a 13 percent increase in pleasure boats.
Investors seem to have already priced in the wealth effect on certain luxury stocks. Tiffany shares are down 40 percent from their peak last year, and Richemont — which owns Cartier and Van Cleef & Arpels, along with watchmakers Piaget and IWC — has seen its shares drop by a third.
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