US investors are seeking to capitalise on a world engulfed in conflict, increasing exposure to the defence industry in a bet on surging military spending in the coming years.
The influx of capital into defence reflects a broader shift in how investors are responding to a more dangerous geopolitical environment. A series of conflicts, from Russia’s full-scale invasion of Ukraine in 2022 to the US-Iran war this year, together with rising western military spending, are prompting investors to treat defence as a long-term theme and channel capital into a sector once out of favour.
“What’s happening over the past year is that we now have a market defined by higher geopolitical risk and less global co-operation, and defence spending has moved from a sort of cyclical trade to something that is more of a multiyear demand story,” said Matthew Bartolini, global head of research strategists at State Street Investment Management.