Rheinmetall's stock experienced dramatic fluctuations on Monday, March 17, 2025, marking highs and lows against the backdrop of impending defense spending legislation. The stock initially surged past the €1,400 mark, peaking at €1,406.50 during morning trading. This optimism was largely driven by the anticipation of new German legislation which proposes to exempt military expenditures exceeding 1% of GDP from the restrictions of the country’s debt brake.
Despite the day's early excitement, profit-taking followed shortly after the all-time high was achieved, leading to the stock closing down nearly 2% at €1,343. Such volatility is indicative of the current climate surrounding Rheinmetall and the broader defense sector, as companies prepare for potentially significant increases in military funding.
Year-to-date, Rheinmetall shares have gained over 120%, reflecting both market trends and strategic positioning as Germany increases its military budget. This week's financial package, pending required votes, hopes to bring reforms allowing for higher investments in defense without falling foul of debt restrictions.
While Rheinmetall faced selling pressure, it was not alone; the broader defense sector continued to show positive momentum. HENSOLDT shares rose between 1.3% and 3.4% on the same day, bringing them closer to their record levels, and RENK stocks demonstrated strong performance with gains between 5% and 6.6%. Similarly, Steyr Motors hit record highs with shares climbing over 102% to €230 during the same trading session.
An anticipated legislative package is expected to pass with broad support, potentially with two-thirds of the Bundestag favoring it, alongside approval from the Bundesrat later this week. This legislation could open what market analysts describe as "a new chapter" for defense companies within Germany, paving the way for future growth.
Commenting on the dynamics at play, analysts have noted, "Rheinmetall's stock climbed to record highs this week due to anticipated defense spending, but it remains to be seen how profit-taking will impact future trading. Despite this, the prospects at Rheinmetall remain strong long-term, and any correction may be healthy for the company's market position." The prevailing sentiment suggests dividend increases of up to €7.66 compared to €5.70 last year, with analysts projecting even higher stock prices moving forward.
But not all news has been positive. On March 14, doubts were raised when supervisory board member Klaus-Günter Vennemann sold over €6 million worth of Rheinmetall shares at €1,349, which stirred concerns among investors about the stock’s sustainability at such elevated levels. Investor sentiment remains cautious as some analysts suggest the stock is currently overbought, indicating corrections could be on the horizon.
Market watchers must also keep their eyes on upcoming votes concerning the planned financial package, as any delays could lead to additional volatility. With Mario Czaja, CDU member, announcing he would not support the proposed amendment to the Basic Law aimed at the defense fiscal policy, uncertainty lingers. His statement came as part of broader discussions surrounding the collective pledges from the political spectrum for defense funding reforms, raising questions about how cohesive the legislative support will be during voting.
Xetra trading is expected to reflect these dynamics as market participants react to legislative outcomes and investor sentiment surrounding major defense stocks. The DAX index has also shown resilience, climbing over 23,000 points amid this financial climate. Support for stocks is particularly apparent among the medium-sized enterprise market, with the MDax index reaching new heights.
For current and potential investors, the immediate question is whether to take profits from Rheinmetall now or wait for intended longer-term gains. While the stock achieved impressive growth metrics, experts advise careful positioning as the market responds to legislative outcomes and industry trends. According to analysts, for those who enter now, potential upsides from targeted price forecasts approach €1,990, offering substantial incentives for risk-taking among investors.
Lastly, the backdrop of rising geopolitical tensions and the international defense marketplace adds layers of complexity to investment decisions involving defense stocks. German companies like Rheinmetall seek to position themselves advantageously amid global shifts toward increased defense expenditure.
The market will be eager to see how these multi-faceted factors will play out for Rheinmetall and the defense sector as legislators convene to make historic funding decisions this week.
