As most investors would be painfully aware, it's been a rough start to the 2025 calendar year for the stock market. Yes, the S&P/ASX 200 Index (ASX: XJO) is enjoying a dramatic relief rally today in the wake of US President Trump's tariff capitulation, currently up just over 4.5%. Even so, the index remains down by just over 5.9% year-to-date.
But it's a very different story when it comes to defence stocks, namely the BetaShares Global Defence ETF (ASX: ARMR), which has had a very strong start to 2025. This exchange-traded fund (ETF) began the year at a price of $17.04 a unit. But today, those same units are worth $20.35 each at the time of writing. That's up a rosy 6.1% today thus far and up a whopping 19.5% or so since the start of January.
Defence stocks seem to be one of the best places to hide from the extreme volatility that has dominated 2025 to date. To illustrate, other traditional safe-haven sectors have not fared nearly as well.
For example, healthcare stocks have seen heavy losses this year, with the S&P/ASX 200 Health Care Index (ASX: XHJ) down 11.65% year to date.
Consumer staples stocks have held up better. But the S&P/ASX 200 Consumer Staples Index (ASX: XSJ) is still only up by around 2.74% over the same period.
So, could defence stocks be the new safe haven in this uncertain world?
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Are defence stocks the new ASX safe haven?
Well, there's a strong argument that they can be. The ARMR ETF is a fund that holds a range of different defence stocks, sourced from all around the world. Its holdings hail from countries as diverse as France, Germany, Norway, South Korea, and Israel. However, more than 60% of its holdings are currently domiciled in the United States.
ARMR's top positions include Rheinmetall, Palantir Technologies, Raytheon Technologies, and Lockheed Martin. All of these companies derive a significant portion of their revenues and earnings from long-term government defence contracts.
This is why investors view defence stocks as a safe haven. Government military spending is one of the most 'untouchable' areas of the typical budget. Most countries, including the United States and Australia, are committed to a slow but steady ramp-up of government spending on the military over the next decade.
This spending is immune to recessions, inflation, and almost every other kind of economic malady. It's arguably one of the last areas of government spending that voters like to see cut.
Additionally, as we discussed last month, the Trump Administration is pressuring many of its allies across Europe and Asia to increase their defence spending going forward.
If this does occur (which is arguably likely given the current geopolitical environment), the companies in ARMR's portfolio will be direct beneficiaries.
So, if you're an investor who likes to buy assets that offer stability and predictable cash flows, this ASX ETF might be an investment you should consider today.
