As an investor, I’ve been keeping a close eye on the financial markets ever since the Russia-Ukraine war began. One sector that has captured my attention is the defense industry. I’ve observed a significant surge in defense stocks, which has outpaced the growth of the S&P 500. In this article, I’ll share my insights into the performance of defense stocks compared to the broader market and some personal anecdotes that have shaped my understanding of the current investment landscape.
The conflict between Russia and Ukraine has wreaked havoc on global financial markets, but defense stocks have been outperforming in these turbulent times. Since Russia’s invasion of Ukraine on February 24, the Dow Jones U.S. Aerospace & Defense Index has risen by 10%, and the S&P 500 Aerospace & Defense (Industry) index has seen a 9.1% increase. In contrast, the broader S&P 500 index grew by a mere 0.1% in the same period.
While discussing investment strategies with a friend recently, he mentioned how he had shifted some of his portfolios to defense stocks when the conflict began. He pointed out that companies like Lockheed Martin and Northrop Grumman have experienced substantial gains since the start of the war. In fact, defense stocks have collectively risen by about 15% in 2022, easily outperforming the broader market.
It’s interesting to note that even S&P 500 analysts are starting to warm up to the defense sector, with many eyeing the 32 stocks in the iShares U.S. Aerospace & Defense ETF for potential gains. The ongoing conflict has led to an increase in global military spending, topping $2 trillion for the first time in 2021. This growth is expected to continue, further boosting the prospects of defense stocks.
As I reflect on my own investment journey, I remember the times when I focused solely on technology and consumer stocks. However, the Russia-Ukraine war has made me reconsider my investment strategy. The impressive performance of defense stocks amid global turmoil has shown me the importance of diversifying my portfolio and paying attention to geopolitical events.
In conclusion, the Russia-Ukraine war has had a significant impact on defense stocks, with their growth outpacing the broader S&P 500 index. As an investor, it’s crucial to stay informed about global events and adapt our investment strategies accordingly. Defense stocks have proven to be a resilient and profitable sector in these uncertain times, and I’ll be keeping a close eye on their performance as the conflict unfolds.
3 Defense Stocks Picks
- Lockheed Martin Corp (LMT): Lockheed Martin is the largest defense contractor globally, involved in the research, design, development, and manufacturing of advanced technology systems and products. The company operates in various segments, including aeronautics, missiles, and fire control.
- Raytheon Technologies Corp (RTX): Raytheon Technologies is a leading aerospace and defense company, that provides advanced systems and services for commercial, military, and government customers. The company operates through various business segments, including Collins Aerospace, Pratt & Whitney, Raytheon Intelligence & Space, and Raytheon Missiles & Defense.
- Northrop Grumman Corp (NOC): Northrop Grumman is a global defense and aerospace company that provides innovative systems, products, and solutions in autonomous systems, cyber, C4ISR, space, and logistics for customers worldwide.
3 Defense ETFs Picks
- iShares U.S. Aerospace & Defense ETF (ITA): The iShares U.S. Aerospace & Defense ETF is the largest ETF focused on the defense sector. The fund tracks the Dow Jones U.S. Select Aerospace & Defense Index and invests at least 90% of its assets in the underlying index. Top holdings include Lockheed Martin, Raytheon Technologies, and Northrop Grumman.
- Invesco Aerospace & Defense ETF (PPA): The Invesco Aerospace & Defense ETF is designed to track the performance of the SPADE Defense Index, which comprises companies involved in the development, manufacturing, and support of defense, homeland security, and space operations. The fund’s top holdings include Lockheed Martin, Raytheon Technologies, and Northrop Grumman.
- SPDR S&P Aerospace & Defense ETF (XAR): This ETF tracks the performance of the S&P Aerospace & Defense Select Industry Index, offering exposure to U.S. companies engaged in the aerospace and defense industries. The fund’s top holdings include Lockheed Martin, Raytheon Technologies, and Northrop Grumman.