Secure your portfolio against the warfare of the future

The Covid-19 pandemic is just the latest reminder that traditional military equipment such as jets or aircraft carriers can’t always keep countries safe. The defence sector is changing rapidly, says Stephen Connolly

Some sort of missile thing ©Raytheon Technologies
Raytheon Technologies’ shares have outperformed

No foreign power has ever managed to force a US aircraft carrier to abort a mission. But last month a virus succeeded where all America’s enemies have failed. The USS Theodore Roosevelt had to make its way back into harbour last month after an outbreak of Covid-19 on board. 

A microscopic germ laid low one of America’s prime units of power projection and global policing, a nuclear-powered self-sufficient floating city with 6,000 crew and 80 aircraft that can stay at sea for 90 days without being resupplied. 

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The episode is a stark illustration of the changing nature of defence and warfare: we are heading for a world in which conventional weapons and equipment are less effective and we need to rethink our approach to security. Keeping enemies at bay will be a far more complicated undertaking in future, involving a much wider range of technologies. This spells opportunity for long-term investors.

Surveying the landscape

When it comes to defending a country and its people, we typically envisage ships, fighter jets and soldiers operating somewhere overseas. But they can do little about Covid-19, which has been described by politicians as an enemy within and which has forced citizens to stay in their homes and sent economies reeling. 

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The army is usually thought of as a first line of defence, but today in the UK the National Health Service is the critical part of our national security infrastructure, while soldiers drive around delivering protective clothing. 

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Of course, Covid-19 is not an act of war. Nevertheless, one can’t help but ask “what if?” What if it had been not only a deliberate strike, but part of a sustained campaign? Could a state launch such an attack and would we be any the wiser? And what are we going to do next time?

For national security strategists, the implications of this unanticipated viral outbreak are unsettling. It will be feeding its way into thinking about what could threaten our security and what we need to do to stop it. And while it may not mean a sudden upturn in orders for big old naval destroyers, it heightens the sense of unknown risks and so will nevertheless boost sales of more appropriate and modern military equipment. 

Projecting hard military power has its place, but so too does building adaptability and flexibility into operations, as well as investing in strong electronic surveillance and communications. 

The character of war is changing

As the 18th-century Prussian army officer and leading military theorist Carl von Clausewitz argued, the nature of war doesn’t change, but its character does. And now the technological advances in society are driving rapid change in how we defend ourselves, with the incorporation of areas such as communications technology, artificial intelligence (AI), drones and robotics alongside conventional weaponry. With defence needs growing, supporting industries flourish too.

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These trends confirm that we are very much still in the midst of the latest revolution in military affairs. They have occurred before. The arrival of railways in the 19th century, for instance, led to huge advances in troop and supply management and the invention of the breech-loading rifle transformed firepower and efficiency. This time the technology is built around communications, precision guidance, AI, robotics, drones and remote control.

A fast-moving sector

The possibilities are extensive and it is a hallmark of the defence sector that new concepts or techniques seem to move from speculation to reality in almost no time. 

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Once science fiction but now reality, for example, are biometric and sensing devices and even clothing and other wearable equipment that can understand and monitor the stresses and demands on the body though tracking heart rate and temperature.

In his 2006 book A Brief History of the Future, Jacques Attali, the French economist and former civil servant who was an adviser to President François Mitterrand, wrote about chemical, biological, bacteriological and nano-technological weaponry. 

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He believed that “Scientists will strive to increase their power, their miniaturisation and their accuracy. Chemical arms will be capable of seeking out and killing leaders without being detected; pandemics could be ready for unleashing at will; complex genetic arms may one day be directed specifically against certain ethnic groups”.

Technology for Attali was at the forefront of military superiority, with nano-robots undertaking surveillance and infiltrating physical bodies while animals could be cloned to become “living animal bombs”. He also wrote about big data centres and networked battle armour that could sense moods. None of these thoughts have been ditched; indeed, efforts to develop these ideas and trends have intensified. 

Assessing future technologies

For investors, making sense of future wars is largely impossible. It is hopelessly difficult to second-guess decisions that haven’t yet been made and who knows what conditions future leaders and strategists will face? Fortunately, there is a wide array of professions working out what states and their militaries need to confront the future. 

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There are politicians, journalists, academics, think-tanks, engineers and even novelists in on the act. At the same time there are groups tracking technology shifts and uses and feeding these to defence company management. They may not be right about the future, but their ideas and views will be informing discussion and planning between government and the industry and this is ultimately what will drive sales.

It’s all a far cry from the protracted stand-off between the West and the Soviet Union. How military campaigns are conducted has changed significantly. Underpinning the peace between the superpowers during the Cold War was nuclear weaponry. 

A large-scale war would have been unthinkably destructive. But the superpowers fought indirectly through “proxy” conflicts and long, grim civil wars have never disappeared, with dozens of conflicts enduring around the world. 

Key to understanding the defence arena today is recognising the shift to hybrid war, a term that embodies modern conflict. Many will go so far as to say that hybrid warfare has rendered many conventional approaches to defence obsolete.

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Stephen Connolly writes on finance and business, and has worked in investment banking and asset management for over 25 years (



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