Why LVMH Stock Slumped by More Than 3% Today


The shares dipped following the shock of France’s parliamentary election.

A surprise election result in its home country dinged the stock of luxury goods specialist LVMH Moët Hennessy Louis Vuitton (LVMUY -3.34%) on Monday. The company saw the price of its U.S.-listed shares dip by over 3% on the day, while the bellwether S&P 500 index crept up to close 0.1% higher.

A major surprise in France

Investors dislike uncertainty, and the weekend parliamentary elections in France resulted in quite a bit of it the following day. The hard-right National Rally was expected to score a crushing victory, but that didn’t happen. Instead, the leftist New Popular Front took the majority of seats, with 182 out of the total of 577.

That, of course, isn’t enough for an outright majority, and at the moment it is anyone’s guess what kind of government might be formed. Centrist grouping Ensemble Alliance was the second-largest vote-getter, winning 163 seats, but it might not be a comfortable fit in a ruling coalition with the New Popular Front.

In addition to uncertainty, investors can sometimes worry when a left-leaning government comes to power. While it isn’t a hard and fast rule, leftist parties tend to push social spending programs and are more eager to put limits — and/or impose higher taxes — on business activities.

An overreacting market

What does this mean for LVMH, one of the most sprawling and well-known France-based enterprises?

In the short term, probably not much.

The jostling and horse trading that goes into forming a government in Europe will likely take some time, given the ideological gaps between the major parties. Besides, LVMH is basically a collection of global brands that depends far more on the state of the world economy than the politics of its home country. So its share price dip feels like a buying opportunity if anything.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.



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