European defence shares wobbled this week after comments from US President Donald Trump at the World Economic Forum in Davos revived concerns about geopolitics and the trajectory of the war in Ukraine.
But analysts at JP Morgan said the market reaction underestimated the scale and durability of the defence spending cycle now underway.
In a note published on Thursday, JP Morgan said speeches by Mark Carney and Donald Trump over the past two days reinforced the view that global defence budgets were entering “the very early stages of a global defence spending upturn that could last for another decade”.
Carney, speaking on Monday in his first Davos appearance as Canadian prime minister, argued that the post-war multilateral order was fracturing and that countries were being forced to prioritise strategic autonomy.
“A country that can’t feed itself, fuel itself or defend itself, has few options,” he said, adding that Canada planned to double defence spending by the end of the decade in ways that supported domestic industry.
Defence stocks dipped during Trump’s speech on Tuesday after he addressed US relations with Greenland and Ukraine.
The president said he did not intend to use force to take control of Greenland, but warned that Washington would “remember” Europe’s response.
JPM said that if the US sought to annex Greenland through economic pressure, such as tariffs, it would place “enormous strain” on transatlantic relations, with unclear implications for European security policy.
Markets were also sensitive to Trump’s latest comments on possible Russia-Ukraine peace talks.
He said he believed both Vladimir Putin and Volodymyr Zelensky wanted to make a deal and that talks were imminent.
JPM argued that similar diplomatic efforts in 2025 had failed and said it expected the war to continue until one or both sides was exhausted, adding that major European nations would block any settlement seen as unfavourable to Ukraine.
Against that backdrop, the bank said recent share price weakness in European defence companies should be seen as a buying opportunity, rather than a signal that the structural case for higher military spending was weakening.