What?

Nations globally are increasing spend on defence as we live in a world of heightened conflict and geopolitical instability. In a similar way to so many other segments, technology is at the heart of the evolution and increased sophistication of defence. Defence technology continues to grow and thrive regardless of economic cycles or market volatility. This presents an obvious and robust investment opportunity to gain exposure to this area of the market and the companies driving it. Well known players in this space are Lockheed Martin or Palantir as an example, but as usual an ETF ensuring sector-wide exposure is likely the way to go. Read on…

Why?

1. Governments don’t stop spending on security, no matter the political climate, the market conditions or the economic environment. In fact, military expense is at an all time high of $2 trillion as of 2023. This means a steady, sustained flow of business and funding for companies in the space.
2. The future of defence is tech, it’s no longer just about traditional weapon systems. The future of defence is cutting edge technology led by AI, cyber warfare, drones and missile systems led by robotics. This is the next generation of military defence.
3. As well as being a high growth area, the defence sector is also a (ahem) defensive investment play. As we wrote above, defence companies tend to perform and hold relatively well regardless of wider market conditions. Many defence technology companies are anchored by government contracts and predictable revenue streams.
4. While nobody wishes for conflict, the reality of the world in which we live is that geopolitical instability is a reality and in more than one part of the globe it shows little sign of abating. Equally, nations find themselves in a race against each other to have the strongest military capabilities.
5. As defence capabilities become more tech-led, you have the opportunity to tap into a truly innovative and future-forward area of the market

How?

As usual with investing in themes, an ETF makes sense to give broad exposure to a range of defence tech companies and the sector as a whole, capturing the wider opportunity and reducing single company risk and the pressure of picking individual winners. There are established and popular defence tech ETFs in the marketplace that are available to retail investors.

Not financial advice, posts for informational purposes only, always do your own research.