One trend we seem to be witnessing in 2025 is a planned ramp-up of defence spending by governments worldwide.
Fresh from his inauguration, US President Donald Trump has made no secret about his plans for higher military spending in the United States. But he has also made it clear he expects to see American allies increase their defence spending as well. Allies in Europe, Asia, and here in Australia.
Several global geopolitical flashpoints, ranging from the war in Ukraine to tensions in the Middle East, are still generating plenty of concern. As such, it's also not difficult to make the case that global defence spending wasn't going to trend down over the coming years anyway.
You might have your own thoughts on this situation and whether it is a good or bad thing for the world. However, successful investing involves playing with the hands that we are dealt. Not the ones we'd like to see.
If we do assume that global defence spending will rise in the coming years, it will probably benefit the ASX exchange-traded funds (ETFs) that track this specific sector. Let's delve into two ASX ETFs that investors can bet on if they wish to participate in this trend.
2 ASX ETFs that will cash in on higher defence spending
First up, we have the BetaShares Global Defence ETF (ASX: ARMR). This fund holds around 60 companies from around the world that are all leaders in military and defence equipment and technology. These are the stocks that arguably stand to benefit the most if global defence spending increases in coming years.
61.7% of ARMR's portfolio currently consists of American stocks. However, France, Britain, Germany, South Korea, and several other countries are also represented.
Some of ARMR's top holdings include names like Palantir, Raytheon Technologies, Lockheed Martin, and BAE Systems.
The Betashares Global Defence ETF charges a management fee of 0.55% per annum.
Next, let's check out the VanEck Global Defence ETF (ASX: DFND). This ETF is a little more concentrated than ARMR. It currently holds 29 underlying stocks. These are selected in a similar manner though. The globe's top providers of military equipment and technology are present here.
Again, these holdings are heavily weighted towards the US, but not exclusively. You'll find significant exposure to France, Italy, Korea, and Israel, amongst others.
Some of DFND's top holdings include Palantir, Thales, Leidos Holdings, and Saab.
The Vaneck Global Defence ETF charges a management fee of 0.65% per annum.
