There are no signs of weakness in the US defense sector. The "Magnificent Seven" of the defense sector performed strongly, with the exception of Boeing (-39%), which has lost much of its magnificence in the wake of its setbacks. Heico (+45%) has had a remarkable year in terms of performance, and its share price received a further boost when Warren Buffett took a position in the company.

In Europe, the S&P Aerospace & Defense Select Industry Index is up 18% this year, while the STOXX Europe Total Market Aerospace & Defense Index is up 23 points. The former underperforms the S&P 500 by just two points, while the latter significantly outperforms both the Stoxx Europe 600 and the US flagship index.

Among the sector's large caps in Europe, only Italian shipbuilder Fincantieri (-14%) and aeronautics manufacturer Airbus (-9%) (although the decline concerns commercial aviation more than defense) have fallen since the start of the year. In particular, the Ukrainian incursions into Russian territory punctuated significant rebounds in August, before a gradual decline sustained by hopes of a ceasefire. This decline was short-lived, however, as an escalation in tensions marked by Iran's missile strikes on Israel revived the sector.

Kongsberg Gruppen (+132%) put in a spectacular performance, doing almost as well as Nvidia (+153%) - that's saying something - thanks in particular to an agreement with the US Air Force concerning JSM missiles for its F-35s. Rheinmetall (+74%), SAAB (+49%), Leonardo (+40%) and Safran (+30%) were the next big performers.

ETF tracking the defense sector:

  • iShares U.S. Aerospace & Defense ETF: the tracker is designed to track the Dow Jones U.S. Select Aerospace & Defense Index. The ETF provides physical exposure to 36 underlying stocks in the aerospace and defense sub-sectors. Fees are 0.4% for assets under management of $6.3 billion.