After the Putin Rally, Europe’s Defense Stocks Get a Trump Bump
Europe isn’t where American investors usually turn for growth, but the defense sector is a somewhat depressing exception these days. After years in relative obscurity, stocks such as Germany’s Rheinmetall and Sweden’s Saab rallied when Russia invaded Ukraine in 2022. There was a lull last summer when Ukraine was making good progress on the battlefield, but this winter they have rocketed again.
Rheinmetall shares are up almost 60% since the start of the year. It isn’t just that the momentum in Ukraine now seems to be behind Russia, nor that war has also broken out in Israel. A critical factor in the latest rally has been U.S.
isolationism. In campaign rallies last month, presidential hopeful Donald Trump attacked the North Atlantic Treaty Organization, which guarantees American support for European security, repeating a mantra he developed in office. Meanwhile, an aid package for Ukraine is stuck in Congress.
After the energy independence push of 2022, security independence is now the talk of European capitals. European Commission President Ursula von der Leyen told a Brussels news network last month that EU member states were projected to spend 350 billion euros on defense this year, equivalent to roughly $380 billion and up from just €240 billion in 2022. Companies have stoked investor confidence too.
Rheinmetall reported Thursday that its revenue increased 12% last year, and, more importantly, said it expects growth of almost 40% in 2024. Saab last month gave guidance for top-line growth of roughly 15% annually on average through 2027—a big increase compared with its previous target of 10%. Both companies have been early to benefit from increased military spending because they sell a lot of munitions—shells, missiles
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