Could Trump’s NATO push move markets?

Hey Superheroes,

Markets kicked off the week cautiously as macro shifts met micro surprises.

The ASX 200 hovered near 8,500, while the Nasdaq climbed to a record high on Tuesday and the S&P 500 came within a whisker of its all-time peak. On the stock level, standout names on both sides of the Pacific hit fresh highs – with CBA and Nvidia both setting new records.

Rate cut hopes surged after Aussie inflation eased to just 2.1% – the lowest level since 2021. And while optimism held, Trump’s renewed push for higher NATO defence spending introduced a note of intrigue to global markets.

Let’s dive into that last one.

Trump’s NATO Push: Defence or Disruption?

With Israel and Iran tensions ongoing, Trump’s call for higher NATO spending has landed and is sending waves across governments and the markets.

At this week’s summit in The Hague, NATO members agreed to lift their defence and security spending to 5% of GDP by 2035. 

It’s the biggest increase in the alliance’s history, more than doubling the long-standing 2% goal – and a move largely driven by Trump’s pressure campaign.

A new arms race?

The 5% target includes 3.5% for core military spending and 1.5% for defence-related infrastructure like cybersecurity and energy. It’s a big number and most NATO countries will need to make drastic budget shifts – or as some believe, “creative accounting.” 

Spain, for example, would need to find an extra €300 billion. Prime Minister Pedro Sánchez didn’t hold back – saying the money might have to come straight out of health and education.

Either way governments decide to go, the new number will likely make waves across the defense industry.

Climate and aid casualties

The policy is also raising environmental red flags. Military emissions could surge, with one estimate putting NATO’s 2030 carbon footprint on par with Brazil and Japan’s combined annual output. Aid budgets are already being slashed across Europe and the UK to make room for defence upgrades.

Critics argue the focus on military expansion could backfire – fuelling instability and leaving social infrastructure to erode.

Who’s leading the charge?

Poland is already above 4% of GDP. The US isn’t far behind. But most Western European nations are miles off the mark. As of 2024, just 23 of 32 members had hit even the 2% benchmark.

Countries like Germany, France and Italy will need to double their spending – or rewrite their fiscal rules – to meet NATO’s expectations.

What this means for investors

The new NATO target could redirect over US$13 trillion into military spending by 2030.

Defence contractors may see a positive impact to their bottom line. Resource-heavy economies like Australia could see upside too, thanks to increased demand for materials and energy. But higher government debt and lower social spending may eventually weigh on growth.

Investors are watching closely to see if this is the start of a full-blown defence-led macro shift – or just more political posturing.

Notice something different with the ASX?

Two key changes to how the ASX runs its trading day took effect this week:

• Single open at 10am: All stocks now open at the same time via a single price auction, replacing the old staggered open based on ticker codes.
• New post-close session: A short trading window after 4pm now allows extra liquidity and trading opportunities, especially when companies release price-sensitive news late in the day.

 Some other things we’re shining the Spotlight on:

WESTFIELD SAYS AU REVOIR TO ASX: Shopping centre giant Westfield (ASX:URW) is planning to leave the ASX in August. Less than 4% of its stock is traded in Australia, so with rising compliance costs, URW will now focus on its primary listing in Paris. Aussie investors will have the option to sell their holdings, convert them to Paris-listed shares, or participate in a sale facility managed by the company.

WOOLWORTHS SAYS NO DEAL: Woolworths (ASX:WOW) is shutting down MyDeal by September after failing to turn around the struggling platform. The closure will result in up to A$100 million in costs but is expected to reduce losses in its digital MarketPlus segment from FY26.

VIRGIN FLIES HIGH: Virgin Australia (ASX:VGN) soared over 11% on its ASX debut this week, closing with a market cap of A$2.58 billion. Virgin’s comeback is being seen as a positive sign for Australia’s quiet IPO pipeline.

TESLA’S ROBOTAXI HITS THE ROAD: After years of hype, Tesla has finally launched its first robotaxi service in Austin. The trial is small – limited area, limited riders and safety monitors in every car – but it still sent Tesla shares up 8% on launch day. Early reviews say the ride is smooth, if not fully autonomous just yet. Elon Musk says this rollout is a crucial step toward Tesla’s long-term driverless vision.

Keep up to date on the markets by following us on Instagram @superheroau.