Inflation has wrecked the typical Wall Street playbook that dominated for much of the past decade. Instead of the market being led by tech and growth stocks, leadership can be found in energy and materials stocks.

Inflation and higher rates devaluing future cash flows of stocks is one aspect. Another is that energy and material stocks are delivering earnings growth in the mid-double-digits while having valuations that are significantly cheaper.

However, there is one investment option - luxury stocks - that delivered above-average returns over the past decade and seems poised to continue outperforming. Adding to the category's odds of success is that many luxury stocks have sold off in recent months along with other stocks tied to discretionary spending. Top luxury stocks include names like LVMH Moet Hennessy (LVMH  ), Daimler (DMLRY  ), Hermes (HESAY  ), and Estee Lauder (EL  ).

There is little reason to expect spending on luxury goods to slow and a cursory glance at secondary markets shows that this category has been little impacted by recent changes in economic and monetary conditions.

The biggest reason that luxury spending should remain strong is that despite inflationary pressures, asset prices remain strong, especially housing and the stock market. With the stock market's recent rally, even it is off by just about 5% from it's all-time highs and nearly 100% higher on a 2-year basis.

And, the housing market is at all-time highs with little expectation of slippage given that inventories are so low. Thus, both of these are supportive of increased 'spending' due to the wealth effect of exuberant stock and housing markets. Finally, due to the stimulus payments and unique and brief nature of the past recession, households are remarkably unleveraged.

This indicates there is more room for support for spending to grow if Americans tap their credit lines, credit cards, and home equity to make purchases as it tends to happen as expansions mature.

All of these indicate that if the economy slows or income growth slows, luxury spending won't be impacted. Further, many stocks in this category have low valuations which means there is the potential for earnings growth and multiple expansion.