Donald Trump ‘peace president’ drives weapons share bonanza

What’s going on here? Basically two things.

First, there is a real expectation that we are about to experience a global wave of defense contracts. Under pressure from Trump, North Atlantic Treaty Organization (NATO) leaders agreed to the increase in June Defense spending is 5 percent of GDPabove the previous spending target of 2 percent.

Markets predict the shift will occur in about a decade, with a significant portion of the windfall flowing to U.S. contractors; But European defense also benefited from trade.

Moreover, there is evidence that major Asian allies, seeing that the US security umbrella is not what it used to be, intend to follow their European counterparts and increase defense spending in their own regions as well.

Wall Street analysts began incorporating these results into their earnings forecasts; This suggests that earnings per share in the aerospace and defense sectors will rise 56 percent this year; 22 percent in 2026; And 16 percent in 2027. But looking at the rich forward earnings multiples paid by investors, the market seems to think even these forecasts are conservative.

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The second part of the story is that defensive stocks appear to be very popular among the retail crowd. These stocks have reached a special, albeit potentially temporary, level. – Cultural resonance in Trump’s America, which Defense Secretary Pete Hegseth now chooses to move on from title of “minister of war” and public health centers are focusing on push-ups rather than vaccines.

Domestically, the macho cultural turn was marked by a rejection of sensitivity and “wokeness”. It was marked by the avoidance of soft power diplomacy abroad and a return to nuclear testing. And in the stock market, this will be remembered as the period when Palantir Technologies, a company that uses artificial intelligence to optimize the “kill chain” of US soldiers on the battlefield, has a market cap of US$476bn ($724bn) at the time of writing; this is approximately 247 times the mixed forward earnings.

Because Palantir is a software company, it’s technically not part of the aerospace and defense index I mentioned earlier. Rather, it is a leading example of “defensive technology,” an investment theme that manages to find itself at the intersection of defense and artificial intelligence, a combination that retail investors cannot resist these days.

All this has left an undeniable impact on the US stock market as a whole. It’s often easy to roll your eyes when Trump tries to take credit for the market (just as I did recently on Truth Social when he shared—in all caps—that the market is stronger than ever due to ill-advised tariff dodges).

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But it’s hard to deny the Trump effect when it comes to defense stocks. I estimate Trump’s defense trade, including aerospace and defense and other “defense tech” stocks in software and professional services, is worth about 1.2 percentage points of the S&P 500’s 14.1 percentage point gain since his inauguration. There’s nothing to sneeze at.

The real question, of course, is whether the rise in defense stocks is a good thing overall.

Despite all the advantages of defense cost sharing within NATO, it is impossible to shake the feeling that we are drifting towards a more conflict-ridden world and the development of an investment subculture that celebrates it.

And the fact that this is happening under the rule of the “Peace President” makes the situation even worse.

Jonathan Levin is a columnist focusing on U.S. markets and the economy. He previously worked as a Bloomberg journalist in the United States, Brazil and Mexico. He is a CFA charterholder.

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