Quarterly Outlook
Upending the global order at blinding speed
John J. Hardy
Global Head of Macro Strategy
Saxo Group
A USD 10,000 handbag or a finely engineered mechanical watch isn’t usually purchased for practical utility but for what it represents. These items sit at the heart of a global luxury market now worth nearly USD 500 billion, driven not by necessity but by identity, exclusivity, and symbolic value. Their appeal is less about solving problems and more about signaling status, taste, or belonging.
For investors, this makes them a unique asset class. From whisky bottles and vintage collectibles to stocks in heritage brands, luxury holdings tend to behave differently. They retain pricing power, often show resilience in downturns, and benefit from long-term macro trends in global wealth concentration, emerging market demand, and digital luxury distribution.
Luxury goods aren’t defined by price alone. In economic terms, a luxury good is one where demand increases disproportionately as income rises. Unlike basic goods—like fuel or food—luxury items can show positive income elasticity. The higher the disposable income, the more people may spend on them.
What sets these goods apart is a mix of scarcity, craftsmanship, and symbolic value. They are nonessential but culturally elevated. Consumers don’t buy them because they need to but because they want to project something about themselves. Economists often describe them as Veblen goods, where demand increases with price precisely because higher prices signal exclusivity.
A few examples of luxury goods are:
Each of these categories may carry vastly different production methods, but they share one common factor: perceived value often exceeds functional value. For investors, this perception is what drives pricing power and long-term demand.
The real value of luxury purchases lies in what they represent: status, aspiration, and identity. This is where psychology comes in. From a behavioural standpoint, luxury spending is often driven by the desire to differentiate. This is known as ‘conspicuous consumption’—the act of purchasing to signal wealth, refined taste, or exclusive access that others might lack.
Scarcity plays a key role. Limited production, long waiting lists, and price hikes all increase perceived value. The more complex an item is to obtain, the more desirable it becomes. That’s why luxury goods thrive on controlled distribution and selective availability. People don’t just want the product; they want what it says about them.
Social factors also shape demand. Celebrity endorsements raise awareness and transfer prestige. When a public figure wears a particular brand or carries a specific item, it sends a strong message to aspirational consumers. The same logic applies on social media. Platforms like Instagram or TikTok turn luxury into a visual currency. Products become status updates—framed, filtered, and shared.
These psychological dynamics help explain why luxury demand stays strong even in inflationary or uncertain environments. Consumers buying for identity and social signaling often remain loyal, regardless of broader market pressures. For investors, understanding these drivers adds context to the pricing power and “customer stickiness” of demand that define the luxury sector.
The luxury sector has grown into a multi-hundred-billion-dollar market for a reason. This growth isn’t limited to the ultra-wealthy. Structural macro trends are reshaping the entire industry, making luxury investment an increasingly relevant theme for long-term portfolios.
Here’s why:
By 2030, over 1.2 billion people are expected to enter the global middle class, mainly in Asia. As incomes rise, more consumers gain access to entry-level luxury—products like beauty, fragrance, or small leather goods. These categories often serve as the first step into the world of luxury and help brands grow beyond just serving the ultra-wealthy.
Roughly USD 84 trillion in wealth will change hands by 2045 in the US alone. Much of that will go to Millennials and Gen Z, who are already spending more on luxury and doing so earlier in life than previous generations. Their choices tend to reflect different priorities: they value heritage but expect digital access, ethical standards, and standout design.
Luxury brands operate with less price sensitivity. Their customers tend to be less affected by inflation or rate hikes, which allows brands to preserve margins and avoid discount cycles. This dynamic has helped luxury companies outperform broader retail benchmarks during periods of volatility.
Many brands are moving beyond products into experiences like hotels, yachts, dining, and even wellness. This strategic shift broadens revenue streams and increases brand touchpoints, making customer relationships more durable and recurring. Investors benefit from exposure to these multi-channel ecosystems, which are less dependent on single product lines.
Luxury’s embrace of direct-to-consumer channels and data-rich CRM strategies has transformed e-commerce from a risk into a growth driver. Digital platforms now allow brands to control pricing, improve personalisation, and drive higher margins through owned traffic and clienteling.
The most successful luxury firms sell identity, not just products. Their value comes from decades of brand-building, storytelling, and exclusivity. Heritage, craftsmanship, and controlled supply create strong emotional connections and long-term customer loyalty. These factors give certain brands lasting demand and protect their pricing power—much like intellectual property does in other sectors.
Not all luxury investments take the same shape. Some come in the form of equities, while others are tangible. Understanding the difference matters.
Investing in luxury stocks or ETFs offers scalable exposure to the sector. Investors can back established names or broader indices, benefiting from global demand, strong margins, and long-term brand equity. Liquidity is a key advantage here—shares can be bought or sold instantly, and many luxury firms return capital through dividends or buybacks. That said, liquidity varies: large conglomerates are highly tradable, while smaller niche brands may be less liquid.
Luxury real estate (think city apartments in global hubs or second homes in resort areas) offers both capital appreciation and potential rental income. In tight markets, these properties tend to hold value well. But entry costs are high, and liquidity is low. Exit timelines are longer, and transaction fees can reduce returns. Still, for many investors, a Paris or Manhattan apartment doubles as both an investment and a lifestyle asset.
Rare timepieces, limited-edition handbags, and other high-end collectibles can appreciate significantly. According to the Knight Frank Wealth Report, luxury watches appreciated 138% over the last decade, and handbags rose 67%. However, these markets require expertise. Condition, provenance, and market timing are critical. Liquidity is also limited since resale often depends on auctions or specialist platforms, which can involve high fees and inconsistent pricing. Additionally, physical assets also carry operational burdens: items must be stored, insured, and authenticated; watches and handbags may require climate-controlled safes. Unlike equities, they don’t generate passive income unless they are actively monetised through rental or resales.
Luxury-themed ETFs have become a popular way for investors to gain broad exposure to premium consumer brands without picking individual stocks or holding physical assets. These funds typically include companies across fashion, cosmetics, accessories, spirits, luxury autos, and high-end travel or hospitality.
Most luxury ETFs track indices focused on companies that generate a large share of revenue from high-end consumer spending. While the exact holdings vary, they tend to prioritise global leaders with pricing power, strong brand equity, and international demand. Investors also benefit from built-in diversification across both sectors and regions.
Luxury ETFs offer immediate diversification, low entry thresholds, and exposure to long-term themes such as rising global wealth, millennial spending, and intergenerational wealth transfer. They’re also liquid and easy to rebalance.
However, most of these ETFs lean heavily toward large-cap holdings, with limited exposure to emerging or niche luxury brands. Passive strategies also mean investors are tied to the fund’s index decisions, even if certain brands underperform or sector weights become lopsided. Returns across different luxury ETFs may also overlap significantly due to similar core holdings.
Luxury brands once resisted e-commerce, fearing it might dilute exclusivity. That position has shifted. Today, digital transformation is integral to how luxury grows, competes, and builds long-term brand equity.
Social media platforms like Instagram and TikTok have redefined how consumers discover and engage with high-end goods. A single influencer post can generate more visibility than a runway show. Visual storytelling and social proof have become essential tools for reaching younger demographics. Luxury is no longer confined to boutiques; it exists in curated feeds.
Louis Vuitton, Gucci, and Balenciaga have tested NFTs, in-game skins, and digital collectibles to engage digital-native audiences. While these experiments raised brand visibility, they remain niche initiatives. Previous forecasts that digital assets would represent a USD 50 billion revenue stream by 2030 now appear optimistic. The focus has shifted more toward measured innovation and selective use cases.
Brands now control their digital storefronts with the same precision as their physical flagships. High-touch personalisation, virtual consultations, limited online drops, and data-driven clientele preserve the feeling of exclusivity. Direct-to-consumer channels also improve margins and reduce reliance on third-party distributors.
Digital tools enable brands to anticipate preferences, segment their audiences, and deepen client relationships. This shift from transactional marketing to data-enriched engagement reinforces loyalty. For investors, it signals margin expansion, better capital efficiency, and greater resilience as digital maturity increases.
Now, it’s clear why luxury goods aren’t defined by their usefulness. Their value comes from perception, scarcity, and cultural status. These traits give the sector long-term resilience and pricing power, which is why luxury has become a serious investment theme.
This goes beyond changing consumer taste. The sector offers high margins, strong brand loyalty, and a track record of relative stability during downturns. Its customer base is growing globally, digital strategies are more advanced, and demand is increasingly consolidating around the most successful brands, strengthening their pricing power and competitive advantage.
Exposure to luxury—whether through stocks, ETFs, or select physical assets—offers a way to balance your portfolio risk while participating in a sector that has historically rewarded brand strength and pricing discipline.