Libertad24 - Comercio de valores

Speaking to Revista Risco, the finance section of the Portuguese business platform Executive Digest, João Lampreia, market expert at Freedom24, explains that the current defence cycle cannot be read as a reaction to geopolitical conflict but as a prolonged shift in state budget priorities. "When something grows for 11 consecutive years and its share of GDP reaches multi-year highs, we are no longer facing a cycle." In June 2025 NATO members committed to spending 5% of GDP on defence by 2035. João notes that these commitments are backed by parliamentary votes and cannot be reversed in a single budget year, which is why manufacturers can now see five to ten years of orders ahead. Markets have not priced the sector evenly, and Lampreia's structure for defence exposure follows that split. It runs in three tiers: 50-60% core in diversified manufacturers with solid backlogs and moderate multiples, 25-30% in European second-tier names that have won contracts but have not been revalued, and 15-20% in supply chain technology, where the valuation premium is lowest and resilience to partial de-escalation is highest. As João puts it, the spending comes at a cost, and that cost falls outside the defence sector. Governments either borrow, which pushes up interest rates and sovereign spreads, or they cut elsewhere in the budget, and SIPRI (Stockholm International Peace Research Institute) is already warning that some are simply widening what counts as defence to reach the target. He goes further in the full interview, covering whether the sector meets the definition of a bubble, the four criteria he uses to select companies, where the geographic asymmetries sit between Europe, the US and Asia-Pacific, and why the adjacent industrial supply chains may benefit more durably than defence itself. 🛡 Read more in Executive Digest