"Re-arming" trend sweeps the globe, J.P. Morgan urges to "buy defense stocks on dips"

Recently, Wall Street financial giant JPMorgan Chase released a research report stating that the short-term significant decline trend of global defense and military stocks, including European defense industry stocks, provides a major opportunity for bottom-buying in this still high-growth sector. According to JPMorgan Chase, defense and military stocks are very suitable for "bottom-buying on pullbacks," and they base their bullish expectations for defense and military stocks on a "multi-year global rearmament uptrend cycle," believing that the new upturn in global defense spending is still in its early stages and may continue for "another decade." JPMorgan Chase senior analyst David Perry provided this latest investment advice at the World Economic Forum in Davos, Switzerland, after President Donald Trump's speech on Wednesday. Trump stated this week that he did not want to use excessive military force to control Greenland, which is currently under Danish control. After this news, global defense and military stocks in the stock market generally declined. Some senior analysts view these statements as a significant cooling of the global political tension. Subsequently, Trump stated that after meeting with NATO Secretary General Mark Rutte, a "territorial and military framework" for the future of Greenland had been established. In terms of the stock market, another Wall Street financial giant, Goldman Sachs Group, Inc., observed a 3.0% decline in the benchmark index of "European defense industry stocks" on Thursday, marking the third consecutive day of decline. One of the largest companies in this sector, Rheinmetall AG from Germany, declined by 5.6% over the past three trading days. Buying defense stocks on dips to seize the trend of "international rearmament" "We still recommend investors to buy on dips in European defense industry stocks when they weaken," said Perry from JPMorgan Chase. "We are in a new global defense spending upturn cycle, or the very early stages of 'international rearmament,' which may last for another decade." He added. Perry also cited the latest remarks by Canadian Prime Minister Mark Carney. Carney advocated for medium-sized countries in the world to unite to resist military coercion from powerful superpowers during his speech at Davos. European defense stocks are considered the "most eye-catching" in Europe by 2025, but after experiencing a significant increase in the benchmark below the full-year 2025, sensitivity to military news has continued to rise, primarily because the market has remained highly tense under high valuation. For example, Rheinmetall's stock price is currently trading at more than 40 times the expected earnings for the next year, nearly double the multiple from a year ago. Peace negotiations around Russia and Ukraine have always been a focus of the defense market. The US envoy is expected to meet with Russian President Vladimir Putin on Thursday. However, Perry stated that JPMorgan Chase expects the Russia-Ukraine war to continue "until one or both sides are exhausted," and major European countries will prevent any "bad" or "anti-European political" peace agreements between Russia and Ukraine. "We are entering a new world order where the theme is chaos and reshaping," the senior analyst added. If an investor is concerned about the increasing intensity of global political conflicts, investing in traditional defensive sectors like utilities and essential consumer goods, which are the most typical "traditional safe havens," may not be the best choice. The real good choice is the defense and military sector, which is closely related to politics and has the designation of an "alternative safe haven." Recent statistics show that investment in defense and military stocks has swept the stock market, with aerospace and defense stocks like American Airlines Group Inc. recording a 36% increase in 2025, while similar defense stocks in European stock markets have seen a significant increase of 60% in 2025, even surpassing the core driving sector of the US stock market bull market - the semiconductor sector with around 45% increase, mainly due to Germany and the entire European continent's desire to rearm after Trump announced his decision to focus on US domestic defense construction. Prefer leading international defense companies like Raytheon in missile defense, precision guided munitions Wall Street financial giant Citigroup's bullish stance on defense stocks is similar to JPMorgan Chase's, as Citigroup recently released a research report stating that the trend of "international rearmament" is set to become a structural and multi-year mainline of global defense and military demand. Citigroup also predicted that the defense sector in the international stock market will continue to be a popular investment sector in the next 2-3 years, and is expected to be a core contributing force to driving stock market growth. Both Citigroup and JPMorgan Chase emphasized that Raytheon Technologies Corporation (RTX.US), a US defense giant, with significantly higher international revenue/order exposure compared to its peers such as Lockheed Martin, is bound to become one of the core beneficiaries in the international defense and military sector. Citigroup highlighted in their report that Raytheon's international defense and military business exposure and order structure are more prominent compared to its peers, and this advantage is directly linked to the significant increase in NATO military spending targets, potential additional spending by the European Union, and the acceleration of defense foreign military sales (FMS) and joint production trends. Citigroup categorizes the current defense and military demand as the "super trend of international rearmament": major defense contractors are seeing record international backlogs, and with the increase in NATO military spending as a percentage of GDP targets and the potential large-scale addition of military spending by the European Union, ally budgets are showing a "structural shift upwards." The report emphasizes two intermediate signals: FMS orders and co-production rhythms are accelerating - indicating a shift from "intentional/purchase negotiations" towards more visible execution and delivery (friendly to order growth and revenue confirmation for defense giants); defense and military company management is increasing investment in capacity, partners, and local industrialization (in Europe/Asia) to meet the incremental defense demand after 2026. Both Citigroup and JPMorgan Chase emphasized that during the rearmament cycle, major defense contractors specializing in air defense and missile defense, precision guided ammunition, sensors/radar, command control, and interception systems are often the first to benefit from budget increases. The core defense and military business portfolio of Raytheon (missile and air defense systems, radar and sensors, integrated avionics and integrated military mission systems, etc.) matches well with the procurement direction of "ally restocking + enhancing system countermeasures." This also explains why Citigroup considers "international order ratio/international backlog" as the core key indicator for RTX. Raytheon's pride, the Patriot missile defense system, is one of the backbone systems of air defense in many countries, which RTX has disclosed is used by "19 countries"; the NASAMS (National Advanced Surface to Air Missile System) developed in cooperation with Kongsberg in Norway (with the core missile being the Raytheon AMRAAM) is disclosed by RTX to be used by 13 countries; the FIM-92 Stinger portable air defense missile, RTX has also disclosed as the "preference air defense missile" of 24 countries.