10 JULY 2025
The anticipated surge in defence spending is likely to be a key driver of public sector activity and, therefore, economic growth over the coming years.
But have markets already priced this in?
The chart below shows the performance of the European defence stocks (dark blue line) against their US equivalents (red line) since early 2022. The light blue line shows the S&P 500’s total return. All figures are shown in USD terms.
The start of the Russia-Ukraine war sparked a big rally in European defence stocks, but this trend accelerated sharply immediately after President Trump’s second inauguration in January.
The scale of the outperformance this year dwarfs the prior move, which suggests investors believe the NATO agreement to boost defence spending bears a greater influence on share prices than the prevailing regional conflicts.
However, with European defence stocks rising around fivefold in just three years, a lot of the good news appears to be priced in.
The content of this communication is for information purposes only. Bentley Reid believes that, at the time of publication, the views expressed and opinions given are correct but cannot guarantee replication of depicted performance. Viewers intending to take action based upon the content of this communication should first consult with the professional who advises them on their financial affairs. Capital invested will be at risk, and you may get back less than you invest. The past is not a reliable indicator of future performance. Neither the publisher nor any of its subsidiaries or connected parties accepts responsibility for any direct or indirect loss suffered by a recipient as a result of any action or inaction, in reliance upon the content of this communication.
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