Navigating the Impact of War

With the war in Ukraine now in its third month, some of its impact on the markets is already known, while other economic consequences are still developing. The disruptive effects of international sanctions against Russia have been severe for the Russian economy and have also been felt more widely on the global stage. With continued volatility plaguing investors and no clear path to resolution in Ukraine, it is an important time to revisit what these present conditions may mean for our longer-term outlook for our client portfolios.

While the cost of war in terms of human suffering is immeasurable, the business of war is undeniably lucrative. One of the clearest potential beneficiaries of protracted conflict and rising geopolitical tensions is the defense industry. Since the collapse of the former U.S.S.R. in 1991, many Western nations, including the United States, have been underinvesting in their own defense in light of the lower level of perceived geopolitical risk in the years that followed. However, not long after Russia’s initial invasion of Ukraine in February of 2022, the U.S. and several other Western countries either increased their defense spending or pledged to do so, including Germany’s recent headline-making increase in its military spending to more than 2% of its gross domestic product (GDP). These tremendous financial flows will pay for things like increased personnel, facilities and operations of national militaries, but in large part they also will be used to buy equipment, munitions, aircraft, vehicles and more, all of which will be provided by a defense industry that is ready and waiting.

In looking at defense contractors both in the U.S. and abroad, we believe that some of them are currently very well positioned as an investment opportunity not only over the course of the current conflict, but potentially long beyond it as well. Many of these firms have invested substantially over the years to create significant manufacturing platforms that they can quickly deploy to service the increased demand expected both domestically and overseas. While defense spending may have stagnated to some extent over the past few decades, these firms have nonetheless made tremendous strides in developing technologies like missile systems, electronics and communications systems that are now broadly considered indispensable tools for modern militaries.

The growing demand for these wares will be critical in the years to come not only to help backfill the equipment, munitions and other supplies of those countries who have helped to supply the Ukrainian army and will now need to replenish their own resources, but also to fulfill nations’ increased defense needs in light of rising global threats, whether in Russia or beyond. For defense contractors that have already built out their manufacturing capabilities and are well placed to respond to these rising and well-funded demands, we believe their ability to leverage even small upticks in orders can have a powerful impact on their shareholder value.

View All Posts

This site uses cookies to enhance your website experience. By subscribing to receive our insights, you are agreeing to our use of cookies. Please click here for the full terms and conditions of using the Clough Capital website. 
Although not generally stated throughout, the views described herein reflect the opinion of Clough Capital Partners L.P. (“CCP”), which opinion is subject to change and none of CCP, its affiliates or any funds or products they manage shall have any obligation to inform you of any such changes.
Nothing contained herein constitutes investment, legal, tax, accounting, financial or other advice nor should be relied upon in making an investment or other decision. Nothing herein should be considered an offer to sell, nor a solicitation of an offer to buy, any security in any fund managed or sponsored by CCP or any of its affiliates, or any other investment product or security. Offers to sell or solicitations to invest in any funds may be made only by means of a prospectus or a confidential offering memorandum, and only in accordance with applicable securities laws. Investing involves risk, including the risk that the entire amount invested may be lost. Investors should consider the investment objective, risks, charges and expenses of any investment product carefully before investing and should consult their own professional advisors prior to making any investment decision.
None of CCP, its affiliates nor any funds or products that they manage or sponsor makes any representation or warranty, express or implied, as to the accuracy or completeness of the information contained herein and nothing contained herein shall be relied upon as a promise or representation as to past or future performance of any fund or product. Past performance is neither a guarantee, nor necessarily indicative, of future results, which may be significantly affected by changes in economic and other conditions.
Any outlooks or estimates contained herein, or any projections of future economic, financial or other conditions, are forward-looking statements and, as such, are subject to change without notice and should not be construed as indicative of any actual events that have occurred or may occur. No representations are made that any such forward-looking statements will prove to be accurate. There is a substantial likelihood that at least some, if not all, of the forward-looking statements included herein may prove to be inaccurate, possibly to a significant degree.urthermore, there can be no assurance that any portfolio characteristics, holdings or targets referenced herein will be achieved or maintained and any such information is subject to change without further notice.

You are now leaving Clough Capital Partners L.P.’s website. Clough Capital does not guarantee the accurateness or completeness of any presented on these sites. We encourage you to read the relevant terms of service, privacy policy and other disclosures associated with the site to which you are directed. Our Terms and Conditions, Privacy Policy and related disclosures are limited to the Clough Capital website (

Proceed to