Given the current geopolitical landscape, especially the effects of the Russia-Ukraine conflict, VettaFi’s Investment Case for European Defence highlighted Europe’s efforts to increase its defense spending. In the VettaFi report, there are salient points included in the EU Commission’s white paper regarding Europe’s defense and rearmament plans through the year 2030.
Plans to boost defense spending were already underway. For example, NATO pushed to increase spending equal to 2% of gross domestic product (GDP). With the U.S. threatening to decrease its involvement in NATO affairs, this puts a a larger onus on European nations to prop up its own defense mechanisms as opposed to relying on outside armament sources like the U.S.
One of the byproducts of increasing this defense spending will be an increase in economic growth. This, therefore, could be a revenue booster for European defense companies. EU countries aim to become less reliant on other nations for their armament.
“EU countries will be facilitated to make the necessary investments in our defence capabilities and industry, spending more and better – together,” said Valdis Dombrovskis, EU Commissioner for Economy and Productivity; Implementation and Simplification. "This will also boost economic growth, drive innovation and create jobs, while ensuring fiscal sustainability. Europe will rise to this challenge.
3X European and A&D Equities
EURL and DFEN both offer traders the opportunity to maximize their profit-making potential with 3x leverage. With 3x power comes 3x responsibility, so only seasoned traders should use these products.
EURL offers diversified equities exposure, tracking the FTSE Developed Europe All Cap Index (ACDER). It’s weighted according to market cap, offering exposure to large-, mid-, and small-cap companies in developed markets throughout Europe. The top four country weightings include the United Kingdom, Switzerland, France, and Germany (as of April 30).
Europe’s plans for defense spending run through 2030. Nations will still have to rely on U.S. contractors in the interim. This may last until they become more self-reliant on their own defense contractors domiciled in Europe. That will help the case of DFEN, which includes top aerospace and defense (A&D) names in the U.S. defense industry or companies involved in military aircraft production. A few of those are GE Aerospace, Raytheon Technologies, and Boeing. DFEN tracks the Dow Jones U.S. Select Aerospace & Defense Index (DJSASDT), which adds select exposure to companies in the A&D industry.
For more news, information, and analysis, visit the Leveraged & Inverse Channel.
