The rich live in a different economic world than the rest of us.

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The rich live in a different economic world than the rest of us. The chief financial officer of LVMH Moet Hennessy Louis Vuitton SE, Jean-Jacques Guiony, said on Tuesday, “Luxury is not a proxy for the general economy.”

He is absolutely right. If you read LVMH’s trading update for the third quarter, you might think that the world wasn’t going through political turmoil, rising inflation, and falling stock markets.

Still, investors should be careful. With travel restrictions loosening and many Americans going back to Europe to take advantage of a strong dollar, the third quarter was always going to be a big hit. Now, LVMH has set a very high bar for the next reporting season. This comes at a time when even the biggest companies in the industry are facing more risks.

Even though Europe has done well, it is the US and Chinese consumers who are the most important drivers of demand for high-end goods. And there are a lot of unknowns about both.

From this point of view, LVMH seems to fit in best with luxury companies. Bloomberg Intelligence says that it is the largest and has a strong balance sheet that is moving toward a net cash position in early 2024. That gives it the power to invest in marketing when other companies are cutting back, and maybe even to buy other companies. It sells drinks and beauty products and owns two of the most successful brands in the industry, Louis Vuitton and Christian Dior.

If a luxury shopper cuts back, for example by only buying one handbag a year instead of two, they will probably focus on the most popular brands. They might spend even more on that one thing. This should help both LVMH and its rival Hermes International.

Smaller names will have more to worry about. Prada SpA is an exception to this rule. Younger shoppers are buying its bucket hats and logo-ed loafers in large numbers. If the Italian company can turn this into good sales of handbags, it could be a pleasant surprise.

The big picture is harder for Kering SA, which is in charge of Gucci’s move from cutting-edge to classic. The luxury conglomerate should do well because of the strength of its other brands, like Yves Saint Laurent and Balenciaga. However, it will be hard work to refocus its biggest brand during a downturn in the industry.

Burberry Group Plc is also going through a change and is at risk. But if Burberry’s new designer Daniel Lee can make winning bags and shoes like the ones he made at Kering’s Bottega Veneta, the company may be able to get through the coming rough seas.

The shares of companies that make luxury goods went up on Wednesday. They had been going up for a few weeks. Even with LVMH’s great performance, that seems like a good bet, given the risks that come with selling bling.

Guiony from LVMH said, “Everyone is talking about the recession, but no one has seen it yet.” If and when it comes, the giant should be the one who can handle it the best. But “taxonomies” won’t be safe if it goes in the wrong direction.