“In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist.”

Those words were uttered by President Dwight D. Eisenhower, in his televised farewell address to the nation in 1961. The former five-star U.S. Army General who oversaw D-Day during World War II coined that now infamous phrase: “military-industrial complex.”

Ike was correct…more correct than he could have imagined. War is good for business. It’s a sad commentary on the human condition, but the vast profitability of the aerospace/defense sector is an investment megatrend that you can’t afford to ignore.

An analysis released Monday, April 22 by the Stockholm International Peace Research Institute (SIPRI) indicates a surge in global military expenditures in 2023, surpassing levels not seen in over three decades.

Orders now pouring into the coffers of U.S.-based aerospace/defense contractors will generate lucrative work for years, posing a bonanza for investors with exposure to the sector. As I’ll explain below, defense stocks also make superb inflation hedges and they’re resistant to economic downturns.

The heightened spending in 2023, reaching a staggering $2.4 trillion worldwide, marks a 6.8% increase from the preceding year. While various factors contributed to this escalation, including worsening tensions in regions such as Asia and the Middle East, the main catalyst was the conflict in Ukraine and the looming specter of a broader Russian incursion.

The report depicts a deteriorating global peace and security landscape, characterized by heightened geopolitical volatility. The U.S. emerged as the foremost contributor to this trend, allocating a staggering $916 billion, accounting for over one-third of the total global military expenditure and reaffirming its position as the world’s largest military spender and arms supplier (see chart).

Whenever you hear an American politician claim that our country’s military is being neglected and it’s “hollowed out,” don’t believe it for a second.

The Eastern European flashpoint…

Ukraine, embroiled in a protracted conflict with Russia, allocated a substantial portion of its budget to military endeavors, with military spending totaling $64.8 billion in 2023. This amounted to 58% of the government’s overall expenditure and 37% of the country’s gross domestic product (GDP). Only a handful of nations surpassed Ukraine’s military expenditure in 2023.

Russia, despite maintaining secrecy around its defense investments, is estimated to have allocated approximately $109 billion to its military, making it one of the top spenders globally. This significant allocation underscores Russia’s strategic prioritization of defense amid Russian President Vladimir Putin’s aggressively revanchist policies.

These conflicts have not only spurred heightened military spending but also driven substantial international military aid efforts, particularly from the U.S. and European nations, towards bolstering Ukraine’s defense capabilities.

This aid, amounting to billions in weapons and materiel, underscores the geopolitical significance of the conflict. After bitter and protracted debate, the U.S. House this past weekend finally passed $60 billion in military aid to Ukraine. The Senate is likely to pass the bill in the coming days and President Biden has signaled he will sign it.

European nations have embarked on a multi-year campaign of increased military spending, with a 16% rise across the continent in 2023. This trend is particularly pronounced in Eastern Europe, where military expenditures surged by 31%. A growing number of NATO member nations are meeting the 2% GDP spending benchmark, reflecting a collective commitment to fortifying regional security.

If you’re looking for a source of profits that enjoys multi-year momentum, the aerospace/defense sector fits the bill. Pentagon suppliers get a steady stream of contracts, courtesy of taxpayers, regardless of economic cycles, the movement of inflation and interest rates, the political party in power, or monetary policy.

Uncertainties caused by geopolitical conflict or deadly pandemics only prompt governments to increase defense budgets.

Aerospace/defense is not only a growth proposition; it’s also a hedge against inflation and risk. “Cost-plus” contracts allow military contractors to include higher input costs into what they eventually charge the Pentagon. Not all defense contracts are cost-plus, but many are, and even contracts that aren’t often feature some protection from inflation.

In the meantime, the main U.S. stock market indices closed mixed Wednesday, as rising bond yields superseded generally good earnings reports. Equities ended the day’s session as follows:

• DJIA: -0.11%
• S&P 500: +0.02%
• NASDAQ: +0.10%
• Russell 2000: -0.36%

Read This Story: Gold and Crypto: Powerful Inflation Hedges to Consider Now

There’s another inflation hedge you should consider: cryptocurrency. That’s right…crypto.

Crypto is making ordinary investors rich…and it serves as an inflation hedge, to boot. But you need to make your move now, because the fuse is lit on this market. And every day you wait is literally costing you thousands in profits.

If you’re worried you can’t figure out crypto…don’t be.

Our in-house crypto expert, Alex Benfield, will make it easy for you. You won’t have to figure anything out on your own. He’ll walk you through everything, step by step.

Alex made a personal fortune on crypto. Now, his mission in life is to spread the word about crypto and make other people wealthy, too.

Get in on the crypto action…now. To learn more about Alex’s new trading service, Crypto Trend Investor, click here.

John Persinos is the editorial director of Investing Daily.

To subscribe to John’s video channel, click this icon: