Due to the high interest from investors in the arms industry, we have created an introduction to this sector. The defense sector is a vast machine utilizing a significant portion of essential and popular raw materials, with military demands extending far beyond mere defense capabilities. Below is an introduction to the report, which is available for download at the end of the post.
Introduction — Defense Sector
In the era of increasing geopolitical tensions and rising defense expenditures worldwide, the arms industry is becoming a subject of increasing investor interest. The question that should be asked is: Does the geopolitical situation and the foreign policy of the major blocs represent an opportunity for long-term, stable growth of this sector? In this analysis of the arms industry, we will try to identify areas affecting the sector, based on available data and current trends in the global arms industry, focusing primarily on the aspect of necessary raw materials.
According to the latest data from the Stockholm International Peace Research Institute (SIPRI), published on April 24, 2023, global arms expenditures in 2022 amounted to approximately $2.24 trillion, reaching a new record. Poland, like many other countries, plans to increase defense spending to 3% of GDP from 2023. This situation may suggest that the arms sector will have an opportunity for long-term, stable growth, even though the world was essentially moving towards demilitarization, and some of the increases are already behind us.
Investing in the arms sector is associated with risks related to the difficulty of predicting the end of armed conflicts, as well as various political games and unexpected twists that can affect the value of arms companies’ stocks. Therefore, it is crucial to conduct an individual risk analysis considering one’s situation and portfolio, choosing such instruments and exposures that will be comfortable and safe for us.