While the broader market tanked last year, a small group of companies notched double-digit gains.
I'm talking about defense contractors.
And you can see for yourself how they did:
Lockheed Martin (NYSE: LMT) jumped 35%.Northrop Grumman (NYSE: NOC) shot 40% higher.General Dynamics (NYSE: GD) rose 19.25%.Raytheon Technologies (NYSE: RTX) climbed 17%.Compare that with a 9% drop for the Dow and a 20% collapse of the S&P 500.
Now, you may think that the surge in defense stocks was a fluke - a knee-jerk response to Russia's invasion of Ukraine.
But if that's the case, you'd be mistaken.
Far from a one-off event, 2022 was just the beginning. It was the opening salvo in what figures to be a multi-year offensive of global defense spending.
There are several reasons for this.
First, the world is clearly getting more dangerous.
America's reach and influence in global politics is waning. This has further emboldened bad actors like Russia, China, North Korea, and Iran, among others. And these countries will continue to escalate their attacks on the established Western order.
Secondly, defense spending, especially in European countries, has been woefully inadequate for decades.
Indeed, most of Europe was lulled into a false sense of security by the collapse of the Soviet Union. With no obvious local threat and America's robust military presence on the continent, Europe slashed its military spending and instead funneled money toward infrastructure and social programs.
It took Russia's annexation of Crimea to wake Europe up to the fact that a nation's defense cannot be taken for granted.
Of course, even then, countries like France, Germany, Sweden, and the United Kingdom were slow to respond.
For them it took an even louder call from President Trump, who sharply criticized our NATO allies for not spending more on defense and even threatened to dissolve the alliance altogether.
That prodded the nations of Europe to take the issue of self-reliance a bit more seriously. But it wasn't until Russia launched the most aggressive offensive since Hitler invaded Poland that they fully understood the gravity of the situation.
That sparked the biggest increase in defense spending since the Cold War.