As U.S. President-elect Donald Trump prepares to return to the White House, demand for defense sector exchange-traded funds (ETFs) has surged, reflecting investor optimism and geopolitical concerns. VanEck, a major investment company and ETF issuer, has seen significant inflows into its VanEck Defense UCITS ETF, launched in March 2023. This ETF has experienced a strong upward trend, rising by about 55% in 2024 and already up approximately 8% at the beginning of 2025, with assets under management reaching around $1.8 billion.
Momentum in the Defense Sector
Martijn Rozemuller, the CEO of VanEck’s European arm, attributed the growth in the ETF’s popularity to the ongoing global geopolitical tensions. He explained that these tensions have driven investor interest in defense stocks, which are seen as more secure and potentially profitable during periods of instability. “We are observing strong momentum in the defense sector. Since the launch of our fund, we’ve experienced consistent inflows, with the ongoing global geopolitical tensions being the main interest driver,” said Rozemuller.
NATO’s Growing Defense Spending Plans
One of the key factors contributing to the rising demand for defense stocks is the increased focus on defense spending, particularly in NATO countries. Earlier this month, President-elect Trump proposed that NATO members increase their defense spending to 5% of their gross domestic product (GDP), a significant rise from the current target of 2%.
Industry officials and analysts have expressed confidence that NATO will likely agree to surpass the current defense spending target. As the political landscape continues to shift, defense stocks are becoming more attractive to investors. In the past, many institutional investors avoided the sector, but government policies now seem to favor increased defense spending, making it a much more favorable investment opportunity.
ETF Holdings and Market Sentiment
The VanEck Defense UCITS ETF holds a diversified portfolio of defense-related stocks, including top holdings like Palantir Technologies (NASDAQ: PLTR), Thales (EPA: TCFP), Booz Allen Hamilton (NYSE: BAH), and Leonardo. These companies are expected to benefit from the increasing focus on defense, especially as governments around the world, including NATO, push for more substantial investments in military capabilities.
A Shifting Investment Landscape
As geopolitical tensions persist and the global political climate continues to evolve, the demand for defense ETFs is expected to grow. Investors are increasingly turning to defense stocks as a safe haven in times of uncertainty, while government policies, particularly from the U.S. and NATO, are likely to support continued growth in the sector.
For a deeper dive into how defense stocks are performing, you can explore related financial metrics through Revenue Product Segmentation, offering insights into the financial breakdown of key companies in this sector. Additionally, you can track the performance of top ETFs by reviewing ETF Holdings, which details the major players and their market positions.