We recently published a list of 10 Worst-Performing Industries in 2024. In this article, we are going to take a look at where Luxury Industry stands against other worst-performing industries in 2024.
Several market-influencing factors are at play in 2024. These include policy easing by central banks around the world, falling commodity prices and multiple tech subindustries exiting the 2020-22 hype mania.
Other factors include the consistently growing investor/consumer focus on sustainability, slowing economic growth in China and a volatile geopolitical environment in Europe and the Middle East. These factors have put several industries on a path to recovery, while others on a long-term decline, yet others still in uncharted waters.
The fed cut rates in September by 50 basis points, which was welcomed by Wall Street as a positive signal towards a much anticipated soft landing. Following the cut, the broad market jumped 1.7%, on average, in one of its best days in the year, surpassing its last all-time high in July.
Some analysts, like Rob Rowe, expect the Fed to cut rates by at-least 25 basis points at each meeting through the rest of the year, further boosting investor confidence. The policy easing is expected to boost industries struggling due to a challenging borrowing environment.
However, some industries are likely to keep struggling due to their dependence on commodity markets. These industries are likely to suffer from overcapacity and weak demand. Commodity prices are sensitive to growth in China, whose economy grew 5.2% in 2023. Adjusted for low activity in 2022 due to lockdowns in the country, the 2023 growth was actually slow, and it is expected to slow further to 4.8% in 2024 and 4.5% in 2025, based on IMF forecasts.
On the other hand, industries that have a negative impact on the environment are on a long-term decline in their core business. This is leading to growing investments by the companies in these industries in recycling, carbon-capture technologies and renewable energy.
Best-Performing Industries in 2024
A challenging borrowing environment hasn’t stopped some industries from posting high gains in 2024. Two of the prominent ones include Semiconductors and Precious Metals. Based on the ETFs exposed to the industries, they’ve gained 45% and 37% YTD, respectively.
The demand for semiconductors is mostly driven by growth in AI, which, unlike many tech subindustries, is the only one that survived the 2020-22 hype mania. The industry posted trailing-12 month gains of 54%, based on a Roundhill Investments ETF we tracked exposed to companies at the bleeding edge of AI research in both hardware and software.
On the other hand, precious metals have outperformed the broader market so far owing to fiscal instability, geopolitical volatility and de-dollarization, even as the luxury market suffers onslaught.
Also Read Top 20 Fastest-Growing Industries in the World in the Next 5 Years and 16 Most Profitable Industries in the US in 2024.
Methodology
For our list of the worst-performing industries in 2024, we ranked them on the basis of YTD returns of ETFs and in some cases, of stock indices exposed to the respective industries, as of October 25.
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A luxury jewelry showroom with the latest designs on display.
Luxury
S&P Global Luxury Index: -3.88%
The global luxury market has been underperforming the broader market in 2024 owing to factors, some of which are short-term while others are more long-term. Several luxury companies like LVMH, Burberry, Kering and Lanvin saw double-digit drops in various growth metrics in the start of the year.
The major setback for the industry has been macroeconomic factors like the slowdown of economic growth in China, which accounts for 35% of global luxury consumption, according to research by Bain & Company. The World Bank projects further decline in the Chinese economy’s growth in 2025 despite a temporary boost resulting from recent monetary stimulus measures.
Further, the report notes that the post-pandemic consumer sentiment seems to be shifting from tangible goods to experiences.
Another report by HSBC Global Research attributes the luxury spending decline in major markets like the US and China to the luxury industry’s woes. The report also says that European customers are adopting a ‘wait and see’ approach because many brands had adopted a ‘greedflation’ approach after the pandemic.
The report projected a revised growth rate of 2.8% for the luxury industry for the year 2024, down from 5.5% in the previous forecast, and called it the sixth worst year for the industry in the past 20-year period. However, they see the industry return to single high digits in early 2025, expecting a strong rebound.
Overall, luxury industry ranks 7th on our list of worst-performing industries in 2024. While we acknowledge the potential of luxury industry as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.