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Defense Spending is About Capacity, Not Just Conflict
Defense spending reached $2.89 trillion last year.1 Though some of the spending is undoubtedly in response to several ongoing active conflicts, the 2025 increase continues a year-over-year increase that has been going on for over a decade.1 Governments around the world are no longer merely reacting to individual conflicts, but are proactively rebuilding military capacity after decades of underinvestment. This impetus creates a structural demand cycle that could extend well beyond current or future geopolitical flashpoints.
After the Cold War and the fall of the Soviet Union, global military spending, particularly in Europe, declined alongside the perceived threat level. In the new millennium, the United States—by far the world’s largest military spender—became engaged in two active conflicts in the Middle East, driving up global spending. It wasn’t until 2014 when Russia annexed Crimea that NATO members began to reinvest in their military capacities, aiming for 2% of GDP.2 Increased pressure from the US combined with the growing threat of Russia and the expanded capabilities of China have since encouraged NATO to up that goal to 5% of GDP by 2035.3 Those same threats, among others, affect many other countries well outside the NATO bounds.
The bulk of defense budgets around the world go toward the basics like personnel and equipment maintenance. A large part of the global rearmament plan also involves expanding fleet capacity, including traditional fleets like aircraft, naval vessels, and ground combat machinery in addition to replenishing munitions.
Beyond the basics, increases in military spending have more recently been driven by the changing nature of the conflicts themselves. Governments are investing more heavily in defense technologies to modernize their capabilities in the face of advanced technological military tactics deployed around the world. This includes investments in cybersecurity, aerospace technologies, autonomous systems, unmanned devices, and precision-guided weaponry. Governments are already integrating AI platforms into their defense systems.2
While these advanced technologies evolve quickly, rearmament takes time. Prime defense contractors leverage multi-year procurement contracts to stabilize supply chains and ensure capacity building.4 From an investment point of view, we believe these long-term cycles are largely uncorrelated to broader market cycles.
At a global scale, defense spending appears increasingly tied to long-term national security planning rather than short-term geopolitical events, making the sector potentially appealing for investors seeking long-term growth potential.
The TrueShares Patriot Defense ETF (FLDZ) seeks capital growth through investing in at least 80% of its assets in defense companies, including the manufacturers of civil or military aerospace and defense equipment, such as defense electronics and space equipment. The entirety of FLDZ’s management fee, less fund operating expenses, is used to support the mission of the Folds of Honor Foundation. With FLDZ, investing in defense also means supporting those who serve.
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- https://www.sipri.org/media/press-release/2026/global-military-spending-rise-continues-european-and-asian-expenditures-surge
- https://www.aljazeera.com/news/2026/4/29/five-charts-that-show-the-rise-of-global-militarisation
- https://www.nato.int/en/what-we-do/introduction-to-nato/defence-expenditures-and-natos-5-commitment
- https://www.invesco.com/us/en/insights/reasons-invest-us-defense.html
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*FLDZ changed its name from RiverNorth Patriot ETF to TrueShares Patriot Defense ETF on July 8, 2026. Shares will continue to trade under ticker FLDZ.
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