Analysts predict that the shares of major U.S. defense companies will continue to rise as global defense spending budgets increase in response to the conflict in Eastern Europe.
The share of defense companies could keep rising.
Wall Street analysts say defense stocks will keep rising as the conflict between Russia and Ukraine continues.
The largest of its kind with 33 equity holdings has risen more than 5% since Russian troops invaded Ukraine.
The defense stocks have soared in that time: shares of General Dynamics are up 12%, Huntington Ingalls Industries is up 14%, and Lockheed Martin is up 18%.
Though the U.S. 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.
With NATO sending more troops to member countries in Eastern Europe near the border of Ukraine, analysts believe that this will boost defense stocks in the long term.
Germany said it would increase its defense budget to 2% of GDP from 1.5%, and Japan will increase its defense budget to 1% of GDP for the first time since the 1960s.
Defense stocks have risen since Russia invaded Ukraine.
Chris Senyek wrote that he expects many countries to look to fortify their military capabilities and increase their defense budgets on a secular basis.
The events that unfolded last week in Eastern Europe have caused a shift in the dynamics of the world's politics. With the conflict likely to encourage more spending, the valuations of prime contractors should rise.
The news from Washington D.C. is due in March. Analysts at Bank of America expect America's defense spending to rise to between 3.5% and 4% of GDP because of the paradigm shift caused by Russia's invasion of Ukraine.
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