Shares of major US aerospace and defense companies, which have jumped since Russia launched its invasion of Ukraine last week, should continue to surge higher as global defense spending budgets increase in response to the conflict in eastern Europe, analysts predict.
As the ongoing conflict between Russia and Ukraine wreaks havoc on financial markets, defense stocks are outperforming and Wall Street analysts say they’ll keep rising.
The iShares US Aerospace & Defense ETF, the largest of its kind with 33 equity holdings, has risen more than 5% since Russian troops invaded Ukraine on February 24.
Defense stocks have widely soared at that time: Shares in Raytheon Technologies are up nearly 8%, General Dynamics 12%, Huntington Ingalls Industries 14%, Lockheed Martin 18% and Northrop Grumman 22%.
Though the US and other Western allies have stopped short of sending troops to Ukraine, they have been sending weapons made by the likes of Raytheon and Lockheed Martin, such as Javelin anti-tank missiles and Stinger anti-aircraft missiles.
With NATO deploying more troops to member countries in eastern Europe near Ukraine’s border, the ongoing geopolitical tensions should boost defense stocks in the long term as global defense spending is set to increase, according to analysts.
Several Western allies are already planning defense budget increases, including Germany, which said its defense budget would now make up over 2% of its GDP from 1.5%; Japan also plans to increase its 2022 defense budget to more than 1% of GDP for the first time since the 1960s.