European luxury stocks have stumbled into 2026, hitting three-month lows as analysts question whether the sector's recent rally has pushed valuations too high. The sell-off reflects growing investor caution after a period of strong performance.

The warning comes after luxury brands like LVMH and Kering saw their shares surge on post-pandemic demand and resilient spending from high-net-worth individuals. However, with global economic uncertainty and shifting consumer habits, analysts suggest the premium pricing may not hold.

Investors now watch upcoming earnings reports from major houses for signs of slowing sales growth. A sustained downturn could pressure margins and force a reevaluation of the sector's long-term growth narrative, which has been a cornerstone of European equity portfolios.

The broader market impact is significant, as luxury stocks are a key component of European indices. A prolonged correction could drag on the STOXX Europe 600, affecting fund performance and prompting asset managers to reassess their exposure to the sector.