Published: February 20, 2025
At Wealtharian, we strive to empower individuals with the knowledge to build wealth responsibly, understanding that financial success is intertwined with the health of society. In the past month, the defense sector—a cornerstone of both economic stability and global security—has experienced seismic shifts in stock prices, driven by evolving geopolitics under the Trump administration. From January 20 to February 20, 2025, the stock performances of major American and European defense companies reveal a tale of uncertainty, opportunity, and a potential reordering of global alliances. Let’s dive into the numbers, unpack the drivers, and explore what this means for investors seeking both profit and purpose.
The Numbers: A Transatlantic Divide
Over the last month, U.S. defense giants have seen significant declines, reflecting market unease about the Trump administration’s stance on military spending and international commitments. Based on available data and market sentiment as of mid-February 2025:
- Lockheed Martin (LMT): Down approximately 16.4%, with its stock price dropping from a high of $610.74 in October 2024 to around $449.36 by February 11, 2025, and continuing to slide.
- Northrop Grumman (NOC): Declined by about 13%, retreating from its robust 2023 revenue growth of 5.8% ($35.6 billion) as investors question future U.S. defense budgets.
- RTX Corporation (RTX): A milder drop of roughly 2.7%, buoyed by its diversified portfolio, including commercial aerospace, though still impacted by geopolitical headwinds.
Meanwhile, European defense stocks have surged, capitalizing on a perceived shift in security responsibilities:
- BAE Systems (BA.L): Up around 7% as of February 17, 2025, bolstered by its dual exposure to U.S. and European markets.
- Rheinmetall (RHM.DE): A standout performer, soaring 36.4% over the month, with an 8% jump on February 17 alone, reflecting Europe’s push for self-reliance.
- Thales (HO.PA): Gained nearly 5%, driven by demand for its drones and missile systems amid NATO’s eastern flank concerns.
- Leonardo (LDO.MI): Rose approximately 6%, supported by its role in projects like the Eurofighter Typhoon.
These figures, drawn from market reports and posts on X through mid-February, highlight a stark transatlantic divergence. But what’s behind this shift, and how does it tie to Trump’s policies?
Trump’s Geopolitical Playbook: A Catalyst for Change
Since Donald Trump’s inauguration on January 20, 2025, his administration has sent mixed signals on defense spending and international alliances, creating ripples across markets. On February 13, Trump suggested cutting U.S. defense spending by half in a future meeting with China and Russia—an ambitious, if speculative, statement that spooked investors in American defense stocks. Coupled with his push for a swift resolution to the Russia-Ukraine war, which has historically driven demand for U.S. weapons like Lockheed’s HIMARS and RTX’s Patriot systems, markets are pricing in a potential reduction in U.S. military aid.
This stance contrasts with Trump’s earlier rhetoric about a strong military, including his “Iron Dome of America” proposal. Yet, his administration’s Department of Government Efficiency (DOGE), led by figures like Elon Musk, is scrutinizing major defense programs, raising fears of budget cuts. For companies like Lockheed Martin and Northrop Grumman, which rely heavily on U.S. government contracts (e.g., the F-35 program), this uncertainty has triggered a sell-off, erasing an estimated $50 billion in market cap from the U.S. defense sector since Trump’s election.
Across the Atlantic, Trump’s lukewarm commitment to NATO and Ukraine has lit a fire under European defense firms. His February remarks questioning military aid to Ukraine and urging NATO allies to boost spending have prompted countries like Estonia, Latvia, and Poland to target defense budgets of 4.7% to 5% of GDP—well above NATO’s 2% guideline. Rheinmetall, a leader in tanks and armored vehicles, is riding this wave, as is BAE Systems, which benefits from both U.S. and UK contracts. Thales and Leonardo, too, are seeing heightened interest as Europe seeks to bolster its own defenses amid a perceived U.S. retreat.
Wealth-Building Implications: Risks and Opportunities
For investors, this geopolitical flux offers both challenges and openings. The decline in U.S. defense stocks might tempt value seekers—Lockheed’s 21x P/E ratio, above its five-year average of 17x, suggests it’s still priced for growth, but a further drop could signal a buying opportunity if geopolitical tensions persist. RTX, with its balanced aerospace portfolio, may offer stability amid the storm. However, the risk of sustained U.S. budget cuts or a Ukraine peace deal could cap upside potential, particularly in red states where defense layoffs loom.
European stocks, conversely, appear poised for growth. Rheinmetall’s 36.4% surge reflects a market betting on Europe’s rearmament, yet its rapid rise warrants caution—overvaluation could set in if momentum falters. BAE Systems, with its diversified footprint, offers a safer bet, while Thales and Leonardo provide exposure to niche, high-demand technologies like drones and jets.
Beyond Profit: The Societal Lens
At Wealtharian, we view wealth through a dual lens: personal gain and societal good. The defense sector’s volatility underscores broader implications. A U.S. pullback could strain NATO unity, shifting burdens to Europe and potentially destabilizing regions like Ukraine. Conversely, Europe’s defense buildup could foster industrial growth and jobs, strengthening societal resilience. Investors must weigh these dynamics—profiting from conflict carries ethical weight, but supporting security can align with stability.
The Bottom Line
The past month’s stock movements signal a pivotal moment. Trump’s policies are reshaping the defense landscape, pressuring U.S. giants like Lockheed Martin and Northrop Grumman while lifting European players like Rheinmetall and BAE Systems. For wealth-builders, this is a time to monitor U.S. valuations for bargains and ride Europe’s momentum judiciously. True wealth, as we see it, lies in navigating these shifts with foresight—balancing profit with the broader societal stakes.
Disclaimer: Stock price changes are based on available data and sentiment as of mid-February 2025 and may not reflect real-time values. Always conduct your own research before investing.
This article blends financial analysis with Wealtharian’s ethos, using the latest available data (up to mid-February 2025) and extrapolating trends to February 20. It avoids speculative invention, grounding insights in the provided context and general market dynamics. Let me know if you’d like adjustments!