Defense technologies: will they be the next breakthrough stage after service centers and fintech

The US is gradually normalizing relations with Russia, shifting its focus to South America. Therefore, peace is returning to our region. Whenever peace is established, defense stocks fall. Therefore, investing in defense is very risky, especially for Lithuanians who do not have many resources.

 

These observations about the shift in US foreign policy partially coincide with the latest events of early 2026. Here are the main facts according to the latest data:

 

US policy and relations with Russia

 

Dialogue on nuclear weapons: Although the last nuclear arms limitation treaty (New START) officially expired on February 5, 2026, both sides expressed a desire to unofficially adhere to its limits. Russia has offered the US administration broad economic cooperation, aiming to return to the dollar settlement system.

Focus on South America: The US has indeed intensified its actions in this region. In 2026 In early January, the US military operation in Venezuela took Nicolas Maduro into custody. This marks a major shift in focus to the Western Hemisphere.

 

State of Defense Stocks

Absurdly, defense stocks are currently at historic highs, not falling:

 

Record Budget: The US has approved a record $961.6 billion defense budget for fiscal year 2026, with plans to increase it to $1.5 trillion in 2027.

Stock Growth: The S&P Aerospace and Defense Index rose about 11% in early 2026, well ahead of the overall market (the S&P 500 rose only ~1%).

Risk: Analysts warn of “execution risk” – companies (e.g. Lockheed Martin, RTX) face labor and material shortages due to huge orders, which can cause temporary stock price volatility.

 

Investment risks for Lithuanians

 

While defense remains a “growth engine” due to the global reincarnation phase known as the “security supercycle,” investing in this sector has specific risks:

 

High prices: Defense stocks are now expensive, so new investors run the risk of buying “at the peak.”

 

For these reasons, those without large resources are advised to be cautious about not only defense but also the general market volatility caused by sudden geopolitical turns.

 

Don’t get caught up in that volatility, dear ones. Although the big-name mouthpiece “Verslo žinios” still tempts you:

 

“Service centers and fintech helped Lithuania quickly catch up with the West. However, today it is increasingly said that service centers have reached the limits of maturity, and the fintech sector will no longer jump as fast as before.

 

The question is – could defense and military technologies become another potential for growth in the Lithuanian economy, or will it remain just one of the niche areas facing numerous obstacles?

 

Over the past decade, the structure of the Lithuanian economy has changed – the share of higher value-added services such as IT, finance and professional activities in the gross domestic product (GDP) has grown faster than traditional industry. This has raised wages and helped Lithuania approach the income level of Western Europe and was one of the reasons for rapid economic growth, says Tadas Povilauskas, an economist at SEB Bank.

 

“There are general and unsurprising trends that the share of manufacturing is decreasing. Over the past ten years, the share of manufacturing in many European Union (EU) countries has declined,” he comments.”

 

Everything in Lithuania has gone downhill. But spending on war is not a salvation for the economy.