Global defense ETFs, including the iShares U.S. Aerospace & Defense ETF (ITA) and SPDR S&P Aerospace & Defense ETF (XAR), reached record highs as India-Pakistan tensions and Ukraine conflict spillovers drive a “forever wars” investment thesis.
Sector Trends:
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U.S. Defense Stocks: Lockheed Martin (+7%), Raytheon (+6%).
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European Arms Makers: BAE Systems (+5%), Rheinmetall (+8%).
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Asian Surge: Norinco (+22%), HAL (+10%).
Investor Strategy:
“Defense equities have supplanted tech as the core growth engine of modern portfolios,” declared Jane Fraser, BlackRock’s Head of Thematic Investing. “The convergence of climate-driven conflicts and AI-powered warfare has rendered this sector not just resilient, but essential to 21st-century economic stability.”
Risks:
- Ethical Divestment Pressure:
ESG-focused funds are accelerating divestment from defense stocks, citing ethical objections to ‘forever wars,’ even as the sector delivers market-beating returns that challenge traditional ESG performance metrics. - Valuation Concerns:
Valuation alarms sound as the iShares U.S. Aerospace & Defense ETF (ITA) trades at a 25x P/E ratio – a 39% premium to its 10-year average of 18x – stoking fears of a sector bubble as retail investors chase momentum.
