First of all, let’s look at the sector’s stock market data from a historical perspective. From 1995 to the present day, the MSCI World Aerospace and Defense Index, which includes large and mid-cap global defense and aerospace companies in 23 developed market countries, has reported an annualized return of 10.86%, while the global stock market represented by the MSCI World Index has offered a return of 7.54%.
This is not an index with a large number of constituents, only 22 companies. Of these, three companies have a weighting of more than 10% in the index: Raytheon Technologies (18.43%), Lockheed Martin (13.91%) and Boeing Co (10.78%).
This year in particular, while the global equity market was down 13% through April, the sector contributed a positive return of 2%, a spread of 15 percentage points in just four months. The warlike tension that is driving higher defense budgets is being discounted in the market with rising prices. For example, Germany announced a historic change in defense policy and said it would launch a 100 billion euro fund to modernize its armed forces.