The defense sector is enjoying a meteoric rise on the stock market as a result of growing geopolitical tensions, particularly in Europe and Ukraine. At the same time, the Swiss National Bank has posted a record profit, and the major luxury goods companies, despite their subdued performance, are proving resilient in the face of an uncertain global market.
The defense sector : top stock market valuations
Europe’s defense sector has seen a veritable explosion in value in recent days, fuelled by escalating geopolitical tensions. Growing concerns about American disengagement from NATO, fueled by Donald Trump‘s comments, have prompted European governments to review their defense strategies and plan massive investments in armaments.
As a result, defense companies such as Dassault Aviation (+16.80%), Thales (+13.12%) and Rheinmetall (+11.82%) recorded spectacular increases in market capitalization at midday. In addition, defense sector stocks are now trading at multiples close to those of luxury goods stocks, with a valuation ratio of 25 times estimated earnings per share for 2025, a level comparable to that observed for luxury giants such as Hermès or LVMH.
It has to be said that defense companies have seen their market capitalization rise steadily since February 2022, the date of Russia’s invasion of Ukraine. Rheinmetall, for example, has seen its share price rise by 867% in three years, while BAE Systems and Rolls-Royce, which continues to invest more and more in defense equipment, have seen their shares jump by 375% and 453% respectively. The increase in European military budgets, which could reach an additional $300 billion, should sustain this momentum in the long term.
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Featured photo : © Swiss National Bank
