Defense stocks break the usual war trade

[Jet fighters flying over the clouds.]
bfk92/E+ via Getty Images

Defense shares (ITA [https://seekingalpha.com/symbol/ITA]) (XAR [https://seekingalpha.com/symbol/XAR]) have broken from their usual wartime playbook following U.S.-led Operation Epic Fury, with major contractors posting losses of roughly 10%–20% in the first 30 trading days since the Middle East conflict began at the end of February, according to a recent Arbor Data Science analysis.

The decline stands in sharp contrast to prior military escalations, where defense names typically rallied as investors priced in higher weapons demand and extended spending cycles.

Arbor’s comparison shows the sector posted solid gains following Russia’s 2022 invasion of Ukraine, the Hamas attack on Israel in 2023, Russia’s 2014 annexation of Crimea, the post-9/11 war period and the 1990 Gulf War.

This time, General Dynamics (GD [https://seekingalpha.com/symbol/GD]), Lockheed Martin (LMT [https://seekingalpha.com/symbol/LMT]), Northrop Grumman (NOC [https://seekingalpha.com/symbol/NOC]) and RTX (RTX [https://seekingalpha.com/symbol/RTX]) have all weakened early even as broader geopolitical risk stayed elevated.

The divergence marks an unusual moment for investors who have long relied on defense stocks as a hedge during military escalations.
[Arbor Data Science]
Arbor Data Science

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