Most investors view the defense and aerospace sectors through a single lens, becoming bullish only when international conflicts escalate and bearish when resolution prospects arise. While this makes sense (on paper), there is a lot more that goes on behind the scenes in terms of drivers for future earnings and contract volumes in the space.
Today, as part of ongoing trade tariff negotiations between the United States and the European Union, defense contracts are increasingly being tied to trade concessions. Most recently, Ukraine proposed a $100 billion weapons procurement deal with the United States, backed by European partners.
Since these developments aren’t tied to news of renewed conflict, they didn’t get a lot of media coverage so retail investors may not have picked up on the trend. However, they provide sustainable tailwinds for defense stocks like Boeing Co. (NYSE: BA) and Lockheed Martin Corp. (NYSE: LMT)—and a reason investors should keep these two stocks on their watchlists.
