How Emerging Markets Equities Benefit From Rising Defense Spending

Core Viewpoint - The rise in global conflict and defense spending presents potential benefits for emerging markets equities, particularly in the defense sector [1] Group 1: Global Conflict and Defense Spending - Global conflict has increased in 2026, with notable events such as Russia's invasion of Ukraine and U.S. military actions in Venezuela and Iran contributing to market volatility [1] - Defense spending is on the rise as nations prepare for a multipolar world, which may initially concern investors regarding emerging markets equities [1] Group 2: Emerging Markets and Defense Sector - Emerging markets companies are increasingly significant in global military spending, with China and South Korea ranking fourth and tenth respectively in arms exports from 2020 to 2024, and Turkey ranking eleventh [1] - U.S. pressure for NATO defense spending, enhanced budgetary capabilities of smaller economies, and rising geopolitical tensions are driving military industry spending [1] Group 3: Investment Opportunities - Emerging markets defense firms have demonstrated specialization and efficiency in fulfilling orders, supported by government backing [1] - The Avantis Emerging Markets Equity ETF (AVEM) is highlighted as a viable investment option, having attracted significant inflows and achieving a 45.4% return over the past year [1]