From Guns to Gucci - The Defense Trade Unwinds

The defense fade

Recent weakness in European defense seems positioning-driven according to JPM, with their defense basket’s long/short ratio near the 80th percentile since 2018, possibly serving as the funding leg for the luxury rally. Over the weekend, a cease-fire was reached in the Middle East, while Trump signaled renewed focus on ending the war in Ukraine. SXPARO (aero/defense index) is down to the 50 day and the trend line from early this year, must hold.