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After a torrid 2020 as a result of the worldwide COVID pandemic, 2021 saw a dramatic recovery of the luxury product market, and many expected more of the same in 2022. But with war in Ukraine, a belligerent Russia in the grip of sanctions, and China and Hong Kong seeing a dramatic rise in Omicron infections, analysts are no longer as confident.

As of yet, there are no clear trends, but there is uncertainty, and that is something that investors do not generally appreciate. Since the start of the Ukrainian crisis, share prices of luxury brands are down from where they were at the start of the year, with LVMH seeing a more than 14 percent fall in its share price, Kering an almost 17 percent fall, Hermes shares down by 21 percent, and Richemont’s decreasing in value by 24 percent.

For the most most part, none of the jitteriness in the market is related to issues specific to luxury products. A general inflationary trend, which raises the likelihood of central banks raising prime interest rates quite substantially for the first time in years has left companies in a state of flux, at the same time that they are usure about other elements in the market.

This does not necessarily mean that investors are shying away from the stock markets, nor that they will necessarily spurn the share of luxury brand companies. But it does tend to affect the types of stock they buy. Analysts report that investors are moving away from more volatile “growth stocks,” which in includes the shares of as tech companies, to more solid and steady “value stocks,” which tend to pay reliable dividends and are affected by transient public sentiment.

It is war in the Ukraine that is currently causing the most anxiety in the markets. Photo, by Kevin Schmidt on is for illustrative purposes only.


At present it is the war in Europe that is causing the most anxiety, and this is both a result of Russia’s status as a luxury goods market, and a supplier of raw materials for the luxury product industries, and specifically of diamonds and gold.

In the terms of the former, Russia as a consumer of luxury product goods, the impact will sting but not really compose any substantial threat.

According to Bain & Company, Russian luxury customers account for only between 2 percent and 3 percent of the total luxury goods market, which is about the same as its share personal luxury goods. American and U.S. sanctions barring sales of such products to Russia have been estimated to worth about $330.


“We see a more likely, immediate and relevant impact on Russians’ personal luxury spending locally, strongly driven by local currency devaluation and restrictions in place,” said Claudia D’Arpizio, Bain’s global head of fashion and luxury, speaking to the media. “Russian spending abroad will be drastically interrupted as long as the shut-downs of European airspace to Russian civil airlines are in place.”


The public health situation in China is also a worry. After managing to eradicate instances of COVID almost entirely through a draconian lockdown regime, an outbreak of the highly infectious Omicron variant, which seemed to start in Hong Kong, is now as spreading widely though the Chinese mainland. This is severely impairing business activity in large parts of the nation, which is the world’s second largest luxury product market and is responsible for most of its growth in the past two decades.

By itself China accounts for as much as 21 percent of global luxury sales, and its government has intimated that the current situation could result to the growth of its economy being cut to about 5.5 percent.

What makes the Chinese situation frustrating is that, to a large degree, the current situation is self-imposed. After two years of living in the shadow of COVID, most other countries are adopting attitudes of living alongside the coronavirus, dropping restriction to a bare minimum, even though the rate of infections remains relatively high. What has changed is a reevaluation of the perceived threat of COVID, now reduced because of vaccinations, better therapeutics and natural immunity, versus the devastating economic impacts of draconian COVID restrictions.

Suffering a sharp rise in coronavirus infections, many are now questioning the economic wisdom of China’s zero-COVID strategy. Photo by Robert Norton on

While countries like Australia and New Zealand, which also had adopted a zero-COVID policy, are now shifting their approach and adopting policies in line with the rest of the world, the Chinese government us thus far sticking to its guns. What this suggests that in the that massive luxury product market COVID will continue to be factor for some time to come.