The defense sector registers a negative month on the stock markets

The defense sector in the stock markets is not benefiting from the increase in geopolitical tensions, which often generate uncertainty in global markets.

Only the defense and military industry ETFs (reference indices), which group together arms, security technology, cybersecurity and aerospace companies, registered an average monthly decline of 16 percent in March.

In this period, the iShare US Aerospace & Defense (ITA) fell 15.88 percent, a referenced title that replicates the behavior of companies such as Lockheed Martin, the largest defense contractor, manufacturer of the F-35; RTX Corp, manufacturer of missiles and defense systems; Northrop Grumman, aeronautics and space defense; General Dynamics, dedicated to marine and combat systems, as well as Howmet Aerospace, producer of aerospace components.

Another ETF is the S&P Aerospace & Defense Select Industry (XAR). Its list also includes General Dynamics, Northrop Grumman, Lockheed Martin and Hexcel, among others, which lost 16.4 percent.

Recently, these referenced securities stand out for their superior performance, due to the increase in global military spending. While the defense sector is likely to benefit in the long term, short-term tensions increase uncertainty.

Markets often react sharply to the accumulation of warning data, causing widespread selling, even in defense stocks, specialists said.

They noted that stocks in the military and security sector have offered strong returns in recent years and have attracted great investment interest. It is common for investors to take profits on their stocks after these rallies to lock in their profits; However, while this selling is good for the stock market, it also causes price corrections. If all investors sell their shares, the price drop will be greater.

Individually, Lockheed Martin (MLT) shares fell 6.42 percent in March and had a market loss of $9.736 billion; RTX Corp (RTX) shares have fallen 6.37 percent since the war in the Middle East began, with a decrease in its capitalization value of 17,376 million dollars in the reference period.

Northrop Grumman (NOC) lost 6.26 percent in the third month of the year; General Dynamics (GD), 2.88 percent; Howmet Aerospace (HWM), 13.19 percent, with a total market value loss of 23.1 billion dollars.

Investors usually adopt a risk aversion strategy in times of market uncertainty, as they transfer their capital to more stable assets. Defense stocks, despite their long history of growth, have traditionally been classified as “high beta,” given their dependence on political decisions and purchase order inflows, according to financial experts.