Wall Street began to succumb to the fears of a recession in the US while several of the drivers like the Magnificent seven no longer push as before. However, on the other side of the Atlantic war drums open new alternatives for investors.
In an era of growing geopolitical tensions, many countries are increasing defense spending to strengthen security, seeming to ignore the financing of said military expansion. But that seems like a row; Today, investors evaluate who are emerging to happen to the magnificent seven (Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia and Tesla) in the preferences of managers and analysts. In this context, the European Union (EU) is the one that begins to take steps in this new era of defense, in the face of the approach between the United States and Russia and Washington’s refusal to continue financing NATO.
This situation led to Europe to drastically increase its defense expense in the face of the threat that looms from Moscow. A change that, according to Berenberg experts, will completely wash the sector to the sector: “We are at the beginning of a rearme cycle that will last a decade, which will boost the growth of medium -term profits for the European defense sector at an incomparable level with the last 30 years. The European Defense Budgets, in our opinion, will grow at least a single digit rate until 2035. The impulse of European governments to order European military teams instead of Americans offers 80% of rising potential in the collection of orders. “
Then, while the seven magnificent (American technological most capitalization) are going through difficulties, the main European values of the defense sector are surpassing this group, as well as the US and European stock markets in general, according to Etoro’s analysis.
The new magnificent seven: the “European Defense 7”
It is worth remembering that The magnificent seven Some of the companies with the best results in the world stock market have been considered, with A 63% gain only in 2024. However, your domain is being questioned, since The group has fallen 8% since the beginning of 2025. As investors seek to diversify in other regions and sectors, the European Defense Industry has caught attention with its recent and brilliant Suba. In this sense, Etoro studied the evolution of a portfolio of seven leading European values in defense (BAE, Rolls-Royce, Rheinmetall, Thales, Dassault Aviation, Safran and Leonardo). The study has revealed that This group has risen 46% so far this year, 65% in the last year and 268% in the last five years. This means that The “European Defense 7” has not only beaten to the seven magnificent Americans, but also to US and European stock markets in the same periods. In the last year, the defense basket generated five times the performance of the S&P 500 and almost six times that of Stoxx 600.
Lale Akoner, an analyst at Global Markets in Etoro, explained that the Trump Administration’s Indecisive Military Policywhich suspended all the aid to Ukraine and then backed down in this decision, has exerted more pressure on European leaders to take action on the matter and reach a peace agreement to reduce their dependence on US military aid. In addition, he added that The governments of the entire continent have pledged to increase defense spendingwhile the European Commission has announced a plan to rearma, and that together with the persistent geopolitical tensions, these conditions have created a perfect storm for the European Defense sector, since the region will now depend more on its own contractors, so investors should be attentive to whether these plans and promises materialize in concrete financing and expense in the coming months.
Variable rent: Europe exceeds the US
Within the European Defense 7 portfolio, The German Rheinmetall has recorded the most impressive growth, with an 82% rise so far this year, and more than 13 times in just five years. Bae, the largest British weapons manufacturer, has risen 36% so far this yearafter announcing a record of orders and benefits last month, while Rolls-Royce has also risen 34% after publishing solid benefits for the whole year.
In this way, in a remarkable change in trend, the European Variable Income Market is surpassing the American so far this year: Stoxx 600 has risen 9%, while S&P 500, which for a long time had been the world leader, has dropped 2%. The values called “Granolas”, a diversified portfolio composed of eleven of the most valuable European public companies (GSK, Roche, Asml, Nestlé, Novartis, Novo Nordisk, L’Oreal, LVMH, Astrazeneca, SAP and Sanofi) have also surpassed the 7 magnificent US, with a growth of 12% so far this year.
Source: Ambito
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