Could LVMH be back in style in 2025?

A China renaissance?

Because China is a key market for LVMH, the former’s economic plight weighed heavily on the latter’s performance. But, with a potential revival in 2025, the headwind could turn into a tailwind. Bloomberg reported on Dec. 9:

“China may raise its budget deficit to the highest in three decades and make the deepest interest-rate cuts since 2015 following the boldest stimulus signals from its top leaders in years. At least seven Chinese brokerages forecast that next year’s fiscal deficit target could reach 4% of gross domestic product, the widest since a major tax reform in 1994. Beijing has historically kept its budget deficit ratio at or below 3%.”

Bloomberg Economics added:

“China looks set to unleash the strongest wave of stimulus in years to spur the economy, based on signals from the Politburo meeting. A shift in monetary policy to a stance used during the global financial crisis and a pledge to be more proactive with fiscal policy signal a strong commitment to lifting growth.”

Consequently, LVMH could be a major beneficiary of the policy shift.

Historical precedent

While the fundamentals seem to be trending in a positive direction, the technical outlook is similar to 2021/2022.

If you analyse the left side of the chart, you can see that LVMH was stuck in a downtrend, with lower highs marked by the declining white line. But, with its weekly RSI trending up (the blue line at the bottom marked with the rising white line), the positive divergence gave way to a sharp rally to new all-time highs.

Another re-enactment?

If you turn your attention to the right side of the chart, you can see that the setup is nearly identical. While LVMH continues to make lower highs, its weekly RSI is rising. If the positive divergence leads to a breakout above the downward-sloping white line, a furious rally could follow in the months ahead.

A fashionable strategy

To determine if the rally is for real, you should wait for a breakout above the white line and monitor the weekly RSI to ensure it’s still rising. If so, it means momentum is increasing, and the RSI could push toward 70 with LVMH rising materially along the way.