Introduction
In times of geopolitical tensions and war, the financial market can be volatile. For investors, it is important to understand how these events impact the market and which sectors may benefit. One of the sectors often in the spotlight during conflicts is the defense industry.
Be aware that if you decide to adjust your portfolio based on a conflict, you must closely monitor the circumstances. There is a significant chance that a sudden ceasefire agreement could cause the prices of certain assets to move in a completely different direction.
In this article, I will provide you with some examples of investments that may be interesting during wartime.
What to Invest in During War?
Investing in Government Bonds
In uncertain times, investors seek secure income streams. Government bonds are often popular, especially those from countries like the United States. Despite low interest rates, the prices of government bonds can still rise simply due to a large influx of cash moving from stocks to safer assets. It’s all about supply and demand.
Investing in Gold and Silver
In addition to government bonds, precious metals are also a safe haven for investors. Gold and silver tend to rise during turbulent times, but after the period of tension, there is a significant chance that prices will return to pre-tension levels.
Discover ETFs for investing in gold: ETF Top 5: Index Investing in Gold
Investing in Oil and Gas
Naturally, oil and gas are on the list. Oil is the black gold. There are many ways in which the oil price can be impacted by a conflict. The Strait of Hormuz, for example, is a crucial passage for many shipping companies.
Imagine if Iran were to close this passage, making it difficult to supply oil to the West; it could lead to very interesting times. Or what if Russia shuts off the gas supply?
Discover ETFs for investing in oil and gas: ETF Top 5: Index Investing in oil and gas
Investing in Defense StocksÂ
Defense stocks can be an attractive option during geopolitical unrest due to increased government spending on military equipment and technology. Companies in this sector provide essential products and services that are crucial for national security.
Below is a list of stocks you can consider. This is not investment advice; I have not conducted research on these companies. It is simply a list of the main companies in the sector. Always do your own research and see what fits within your portfolio.
- Lockheed Martin – Known for fighter jets like the F-35 Lightning II, missile systems like the Patriot, and space technologies.Â
- Boeing – Produces military aircraft such as the F/A-18 Super Hornet, helicopters like the AH-64 Apache, and aerospace systems.Â
- BAE Systems – Supplies combat vehicles like the Bradley Fighting Vehicle, naval ships, and advanced electronics for defense.Â
- Raytheon – Specializes in missile and air defense systems such as the Patriot missile and the Stinger missile.Â
- Northrop Grumman Corp – Known for stealth bombers like the B-2 Spirit, unmanned aerial vehicles, and missile defense systems.Â
- General Dynamics Corp – Produces combat vehicles like the Abrams tank and Stryker combat vehicles, as well as naval ships.Â
- Airbus Group – Supplies military aircraft such as the Eurofighter Typhoon and the A400M transport aircraft.Â
- United Technologies Corp – Formerly active in military aircraft engines and aerospace systems, now part of Raytheon Technologies.Â
- L3 Communications – Offers advanced communication and electronic systems for military applications.Â
- Rheinmetall – Specializes in land combat vehicles, ammunition, and air defense systems.Â
- Saab – Known for the Gripen fighter jets and other military technologies.Â
- Leonardo – Produces fighter jets, helicopters, and defense electronics.Â
- Thales – Supplies air defense systems, radar technology, and other advanced defense electronics.Â
- MBDA – Specializes in missile systems, owned by Airbus, BAE Systems, and Leonardo.Â
- Dassault Aviation – Known for fighter jets like the Rafale.
Investing in Defense ETFs
In addition to individual stocks, investors may also consider investing in defense ETFs. These funds offer diversification and exposure to multiple companies within the sector. Some popular defense ETFs are:
- iShares U.S. Aerospace & Defense ETF – Invests in major defense companies such as Lockheed Martin and Boeing.Â
- SPDR S&P Aerospace & Defense ETF – Holds a broad range of defense stocks.Â
- VanEck Defense UCITS ETF – Invests in European and global defense companies such as Thales and Leonardo.
War on the Stock Market
Of course, no one wants war, but as an investor, it’s best to switch off your emotions. Conflicts will always be there. Just look at how you can best ride the waves caused by their actions.
Lastly, I want to mention that taking a position based on certain conflicts is very speculative. Personally, I don’t take any action; my portfolio is globally diversified with all sectors present, so I don’t need to make decisions. I just go along with what the market does, and that’s always the easiest for me!
What do you think? Is World War 3 on the horizon? Should we start filling up our gastanks, stock up on gold and silver, and prepare our supply of dry food, or is it still nothing to worry about for now?
