Following a surge in luxury stocks in early 2023 amid hopes of a bounce-back from the pandemic-era slump, one of Europe’s most lucrative industries may be under pressure once again.

The STOXX Europe Luxury 10 index, which includes the likes of French conglomerate LVMH, Italian automaker Ferrari, and British brand Burberry, recorded its biggest quarterly decline since 2020, Reuters reported Monday. In a report with monthly index news for September, STOXX noted that the luxury bundle was the “worst-performing” among thematic gauges, which can range from global health to electric vehicles.

The luxury index, which is a subset of the larger STOXX Europe Total Market Index, has been impacted by economic uncertainties including soaring inflation and elevated interest rates, as well as slow growth in China.

“The recent decline in European luxury stocks reflects the uncertainty over the European economy and also the uneven growth outlook for the Chinese economy,” Peter Garnry, Saxo Bank’s head of equity strategy, told Reuters. The outlet noted that about $175 billion had been wiped out from the set of 10 stocks since the end of March.

The performance of the luxury-focused index sets off a bleak picture as luxury giants from LVMH to Kering are expected to announce their quarterly results in the coming weeks.

Some companies, including those in the STOXX Europe Luxury 10 index, have sounded the alarm on how poor demand due to suppressed spending activity and economic turbulence could threaten the luxury market. For instance, last month Johann Ruper, chairman of luxury holdings company Richemont, which owns Cartier, remarked that high inflation was throwing a wrench in European demand for luxury goods. His comments prompted a sell-off worth as much as $25 billion in market value in luxury stocks.

“Despite a lot of interest in the [European luxury] sector lately, most investors may want to have more clarity around next year’s estimates to step into some of the highest quality names,” UBS analysts wrote last week in a note viewed by Fortune.

Luxury stocks during the pandemic

The onset of COVID-19 saw a quick decline in the size of the luxury goods market as more people were confined to their homes and unable to shop at physical stores as before. The sudden shock set the industry back by five years to its global value in 2015.

But with time, affluent consumers found ways to pour money back into luxury products and experiences. Companies like LVMH gained handsomely from the return of luxury spending—and the trend helped push up CEO Bernard Arnault’s wealth to over $200 billion earlier this year, briefly making him the world’s richest man.

Investors were betting on China’s reopening following a strict COVID-zero policy to fuel the remainder of the luxury market’s recovery—except that didn’t quite pan out the way people hoped.

Stubborn inflation and other economic pressures impacting demand have made the luxury industry forge a rocky path in recent months. Banks have forecasted the appetite for luxury goods to decline through this year in the U.S. and in Europe, a sign of the shift in consumer spending behavior as they tighten their purse strings. And LVMH, which had occupied the position of Europe’s most valuable company for two-and-a-half years was dethroned by Danish pharma company Novo Nordisk, spooking investors further about the direction luxury stocks are heading. Arnault’s wealth has also dropped to $169 billion, according to the Bloomberg Billionaires Index.

Although a confluence of factors seem to be dampening the outlook on luxury spending, investors are closely watching for the third quarter results to better gauge what to expect for the upcoming year.

UBS analysts also emphasized that Q3 results would help “understand the extent” to which slower sales in China could impact the entire luxury sector, offering “more visibility into 2024.”