In the last five days the title of Leonardo has seen its value decrease by about 15%, that of the German giant of the Rheinmetall armaments of 9%and that of the French Thales by 7%. They too, like all the main European defense companies, have been hit by the wave of discounts caused globally by the introduction of duties by the Trump Administration. A dynamic that surprises, especially considering the huge resources that should flow thanks to the European rearmament plan, initially known as “Rearm Europe”, then “READINESS 2030”, which should support the titles in the sector.
To trigger the fall of the defense companies are two factors: Sales after so many months of rise and uncertainties on the rearmaken plan, which could be affected by a possible slowdown in the economy caused by duties. In other words, the promise of the avalanche of money on the sector may not be kept. But they start from the first factor.
A comparative analysis conducted by the Etoro trading platform before recent discounts, has highlighted an interesting picture. Comparing the performance of the “magnificent 7”, the main US technological companies, with seven leaders in the defense sector in Europe (BAE, Dassault Aviation, Leonardo, Rheinmetall, Rolls-Royce, Safran and Thales), the results were remarkable. Over three years, the magnificent 7 have recorded a growth of 102%, while the nascent stars of the European defense have scored an impressive 354%.
According to Gabriel Debach, Etoro’s Market Analyst, “all the main European defense companies are found in hyper -omporato territory”. This does not necessarily imply an imminent turnaround, but makes the sector more vulnerable to potential disappointments or delays in the implementation of spending programs. The expert suggests investors to carefully monitor the concrete translation of these plans and commitments in funding and expenses in the coming months.
The forecasts for European defense securities in the next are influenced by a complex intertwining of geopolitical factors, military spending policies and market dynamics. On the one hand, the increase in budgets for defense by European governments, with a spending projection that could reach 3% of GDP by 2032, offers a solid long -term support for the sector. To this are added the new contracts and orders of which companies such as Leonardo and Rheinmetall are benefiting, linked to both European rearmament and military support for Ukraine. Despite recent corrections, some analysts have even revised up the target price of titles such as Rheinmetall and Fincantieri, indicating a growth potential still present.
On the other hand, the defense sector has undergone a serious blow to the bag in the last few days. This suggests a phase of “derisking” by investors, which could continue in the short term. In addition, the prolonged growth phase has led many securities in the sector to be considered hyper -computer, increasing the risk of further corrections. Finally, the geopolitical uncertainty, fueled by the pause in US military aid to Ukraine and global tensions, could generate greater volatility on European markets. To which is added the threat of a recession, with Europe increasingly in difficulty to achieve the ambitious rearmament program.
The rearmament plan of the European Union, which aims to collect and distribute 150 billion euros in low -interest loans to facilitate the purchase of advanced weapons and ammunition and provides for a training of the tax rules to mobilize an additional 650 billion euros, bringing the total investment to 800 billion euros. The program has already had a remarkable impact on the actions of the defense sector companies, triggering an exponential growth of their market values. However, recent market flexions highlight a certain caution and the need to carefully monitor the concrete implementation of the plan and the geopolitical dynamics to evaluate the real seal in the sector. The next few days will be dominated by a strong volatility, with cautious investors in evaluating the impact of recent sales and geopolitical dynamics.
