Skinny Jeans No More? What Fashion and Investing Trends Have in Common

Never underestimate the power of fashion to reflect—and, at times, even direct—social, political and economic trends. In the libertine '70s, Diane von Furstenberg launched the wrap dress. Now, in the pandemic-inflected '20s, we have the mom jeans. People worry about higher inflation in the future. Folks, inflation is already here. In trouser form.

I confess, I've never been a "skinny jeans person"—or an "any jeans person," actually. I admire those who can pull off the coltish look, but it isn't for me. If you're a skinny-jean lover, bad news: the fashion flock has laid it to rest and replaced it with the high-waisted, baggy pant. This dramatic reversal has created an overflow effect across the entire retail fashion spectrum. In order to maintain what the Italians call la bella figura, or good proportions, we'll need to update our jackets, tops, footwear and belts. Nowhere is this trend more evident than in the world of denim.

The New Blue Period

Denim is where "casualization of dressing" and "fashion" intersect. As it happens, the current denim trend also mirrors much of what's happening in investing. Stay with me here.

Just as fashion reflects the mood of consumers, markets reflect investor psychology. Hence the saying often attributed to Benjamin Graham, considered the father of value investing: "In the short run, the market is a voting machine, but in the long run, it is a weighing machine."

Fashion trends set off a flurry of new shopping activity. Same goes when a popular investing theme sends a ripple through the markets, as more people jump on the bandwagon. For example, over the past few years, investors have been enamored by large-capitalization technology stocks. This created spillover effects, including a relative lack of interest in value stocks.

Changes in tastes can represent opportunity. The demotion of the skinny jean is a boon for fashion retailers and designers. As personal wardrobes reflate with fresh items for the new silhouette, retail businesses regain profitability and recapture investor interest.

Behind the seams, more opportunities abound. The denim industry, in particular, has been criticized for high water pollution and water consumption—it takes 7,500 litres to make one pair of jeans, according to the United Nations. The fad of distressing jeans harms workers' health, and the synthetic fibres that give pants a snug, not saggy, fit do not decompose, adding to environmental degradation.

As consumers become more aware of the denim industry's environmental and social impact, demand for sustainable jeans is growing. Brands are replacing stretch denim with recycled cotton and innovating wash processes that use less water. One recent fashion partnership included a capsule collection that was rental-only, each pair of jeans tagged with a chip containing the names of all the previous wearers.

The trend away from cheap, fast fashion to buying higher-quality denim, including custom designs by "jeansmiths," means longer-lasting garments that could potentially be recycled or upcycled before heading to a landfill not near you.

Likewise, Canadian investors have made sustainable investing a key priority. According to a report by the Global Sustainable Investment Alliance, sponsored by RBC Global Asset Management and Robeco, investments in sustainable investing assets grew 48 per cent from 2018 to 2020. Canada ranks in first place with the highest proportion of sustainable investment assets (62 per cent), ahead of Europe (42 per cent) and the U.S. (33 per cent).

Whether in fashion styles or investment choices, the same guidelines apply. Know yourself. You don't have to jump on every trend. If you prefer skinny jeans, keep them. On the other hand, if you feel you were born for balloon pants, this is your moment. Remember, as a fashion lover and an investor, you can wait for the opportunity that's right for you. Maybe it's the new denim. Or maybe it's the thing after that.