By Natalie Dopson Schweers | September 8, 2022
With all the concerns about inflation, rising rates, and labor shortages, this quote by Liz Taylor seems particularly relevant – assuming that drink is a strong cup of coffee. And the lipstick reference brings to mind the investment reference to the “lipstick effect.” The investment industry is full of witty quips that define the movement in a direction. The ladies of Gracestone can also attest to the joy factor of a new tube in the latest shade before the color goes out of style and that crisp end is mangled with use. (For gentlemen reading, compare to a new pair of sneakers before a scuff.) The data supports that other gals feel the same way, especially during worrisome economic times.
Professor Juliet Schor was the first to recognize the lipstick effect. But the real recognition of the phrase came after Leonard Lauder, chairman of Estee Lauder, noticed lipstick sales trending up after 9/11 and the 2008 financial crisis. The reasoning behind the movement has since been refined to include other goods that trend upward, as the purchase of little luxuries continues and buyers indulge in small happy purchases that may lessen the worry of economic downturns.
Alas, investing with the lipstick effect is a little more difficult. As analysts and reformed lawyers, our focus is reason before emotion. And while Natalie has just purchased a new tube of her favorite shade, red, from a professed “clean” brand, we are not on the cusp of jumping in to buy cosmetic shares on a fashionable whim. (To be direct, culling out data specifically to lipstick sales is a tricky endeavor at best.) And truthfully, our splurges in times of stress probably include other comfort items such as new linens and wine glasses.
In our world, the resiliency of the beauty industry (or any industry) in difficult periods is an important consideration for the investment advice that is our foundation. At Gracestone, we stress reasonable growth and thoughtful consideration for the meaningful use of capital, whether monetary, time or emotion. So, if it moves you and you have the time, go out and buy yourself (or the lady in your life) a little happy luxury and enjoy. After all, life is for living.