Europe’s luxury-goods sector is heading into 2026 with renewed optimism after a volatile year marked by geopolitical tensions, uneven global demand and shifting consumer sentiment. A sharp recovery in the second half of 2025, fueled by improving Chinese consumption and a wave of creative reinvention across major brands, has prompted analysts to revisit their previously cautious outlooks. With multiple indicators pointing toward stabilization—and even renewed growth—the investment narrative for luxury stocks is strengthening after a challenging post-pandemic adjustment period.

A Turnaround Fueled by Earnings Momentum and Creative Renewal
The industry’s mood has brightened following upbeat third-quarter earnings that exceeded expectations, suggesting that the worst of the slowdown may be behind the sector. Upgraded product lines and the hiring of high-profile creative directors have reinvigorated flagship labels, signaling a return to the innovation cycles that historically drive consumer excitement and spending in the luxury market. UBS analyst Zuzanna Pusz notes that the sector is “entering 2026 hopeful that the worst is over,” pointing to creative revitalization as a catalyst capable of pulling shoppers back into boutiques globally.

After falling 9% in the first six months of 2025—pressured by waning Chinese demand and the drag of Donald Trump’s tariff policy—Goldman Sachs’s basket of European luxury stocks rebounded 12% from July onward. Investors now face the question of whether this recovery represents a temporary relief rally or the early stages of a sustainable upward trend.

China’s Consumer Reawakening Provides a Critical Boost
The sector’s fate is deeply intertwined with China, which accounts for more than 25% of global luxury purchases. A projected 6% rise in Chinese luxury spending next year, following a 5% contraction in 2025, marks one of the most significant drivers of analyst optimism. Beijing is considering additional stimulus to support growth targets and revive household consumption, a policy direction that would offer considerable tailwinds to European brands.

UBS projects a return to 5% organic sales growth for the luxury industry in 2026, aligning with forecasts from JPMorgan and HSBC. Analysts expect all major geographic regions to deliver mid-single-digit growth next year, reversing the stagnation that has weighed on earnings throughout 2025. Brands with high exposure to Chinese consumers—such as Moncler and Swatch Group—stand to benefit the most from this reacceleration.

Repricing Risk as Investors Reenter the Sector
Institutional sentiment toward luxury stocks is shifting. Oddo BHF recently upgraded European consumer goods to neutral from underweight, signaling greater confidence in the sector’s medium-term trajectory. For many investors, luxury remains a structural growth story supported by rising global wealth, resilient brand power, and the increasing sophistication of digital retail channels.

At the same time, risk perceptions are evolving. While tariffs, uneven U.S. demand and changing tourism patterns present ongoing challenges, luxury companies have demonstrated pricing power and operational flexibility—attributes that help cushion macroeconomic shocks. The return of creative direction at major houses provides an intangible yet meaningful tailwind: in luxury, strong design cycles often precede strong financial cycles.

Future Outlook
The durability of the sector’s recovery will hinge on the resilience of Chinese demand, the pace of global economic stabilization and the ability of brands to convert creative momentum into revenue growth. Should stimulus measures in China materialize and global consumer sentiment continue to firm, luxury stocks may have further upside as 2026 unfolds. Investors will focus on early-year earnings and forward guidance for confirmation that the industry is shifting from recovery to expansion.