“This week marks the four-year anniversary of the Ukraine-Russia war, with little prospect of peace on the horizon based on the lack of progress in Geneva last week. Meanwhile, the U.S. military continues its massive buildup in both the Middle East and the Western hemisphere. Over in Asia, a regional arms race is underway as countries like Japan, South Korea and Taiwan prioritize defense spending in the face of China’s rapid military modernization plans. As we have highlighted in the past, the world has entered an era of Great Power Rivalry. We live in a world where might makes right, which underpins our key theme: global defense and cybersecurity. That begins to explain why defense budgets globally are rising at one of the fastest clips in decades. In fact, spending on defense globally has never been higher, reaching a record high of $2.7 trillion in 2024, the last year of data. The U.S., long the largest defense spender, has its sights set on building a “Dream Military,” with a $1.5 trillion budget proposal. Already, the U.S. spends more on defense than the next nine countries combined (Exhibit 3A). Under U.S. pressure, most North Atlantic Treaty Organization members have pledged to raise core military budgets to 3.5% of gross domestic product by 2035 on troops and weapons, with another 1.5% on defense-related items like critical infrastructure and cybersecurity. In coordination with those rising targets, the EU’s revised Stability and Growth Pact allows member states to exceed deficit limits. Order books and factory orders have been influenced: Germany’s defense related factory orders unexpectedly surged over the final three months of 2025, driven by strong demand for heavy machinery, weapons systems and advanced electronics. Reflecting this momentum, Germany’s largest arms manufacturer has seen its share price more than double over the past year.” Læs hele analysen her.
Morten W. Langer
