Sondre Flateraaker @Flaten: "Market Recap – Wednesday, December..."

Switzerland

Market Recap – Wednesday, December 3rd Yesterday felt like another classic example of what this market has become: a “buy the dip, sell the rip” environment with very little sustained momentum. Every time we see individual names start to pick up a bid, the move gets sold almost immediately. My sense is that the indices are simply pausing until we get more clarity from the Fed next week and the jobs number on Friday. When I look at the $SPY (SPDR S&P 500 ETF) , it is sitting right at trendline resistance, almost waiting for confirmation before taking its next step. In this type of market, patience becomes a real advantage. What I had been waiting for actually happened yesterday, and it is worth highlighting. $RHM.DE (Rheinmetall AG) own CEO, Armin Papperger, executed an insider purchase of 298,410 shares. I had expected this for days, because the last time the stock reached these levels they also stepped in and bought heavily back in August. Insider buying is never a guarantee that the stock shoots up the next day, but for me it is an important box to tick when it comes to the long-term fundamentals. It tells us the people closest to the business are willing to put real money behind their conviction. Because of this and because we are getting close to year-end. I made the decision to exit our BAE Systems plc position with a 16% gain. It has consistently lagged our other European defense names, and a key reason is that the United Kingdom has chosen not to participate in the major EU rearmament programs now being rolled out. That decision alone means BAE is missing out on a significant wave of procurement and industrial scaling that companies within the EU will directly benefit from over the next decade. I would rather reward our winners than stay tied to a name structurally positioned to receive fewer contracts. I reallocated that capital into $RHM.DE $TKMS.DE (Tkms AG& Co KGaA) and $PANW (Palo Alto Networks) where the multi-year upside is considerably stronger. I will also keep a close eye on $ESLT (Elbit Systems Ltd) as we move into 2026. The Economist also released an important analysis yesterday, and from an investor perspective, it reinforces everything we have been preparing for. European defense is entering a multi-year acceleration driven by Russia’s war economy, the increasing likelihood of reduced US troop presence, and the need for Europe to rapidly fill capability gaps. The SAFE fund at €150 billion is fully subscribed, the National Escape Clause unlocks another €650 billion, and NATO’s 3.5% GDP spending target by 2035 plus an additional 1.5% dedicated to infrastructure pushes annual European defense expenditure to roughly €500–€700 billion. About thirty percent of that is procurement. This represents a fifty percent nominal increase since 2022, with EU spending projected at €381 billion for 2025 alone, and an expected revenue growth rate of over ten percent annually for European arms manufacturers for the next decade. Everything we have positioned for remains intact. On the US side, We also got more details on the $BA (Boeing) F-47 entering the US Air Force in 2028. Its core capability controlling multiple AI-operated “loyal wingmen” drones is exactly the type of next-generation military development that companies like Anduril and $KTOS (Kratos Defense & Security Solutions Inc) are built for. A single F-47 could oversee two to five drones at once, radically scaling force projection capability. This is precisely the future the defense sector is preparing for, and why the structural tailwinds for our thesis remain so strong. $AMZN (Amazon.com Inc) added to the AI arms race by launching its new Trainium 3 chips, directly challenging Nvidia and Google. Their UltraServers, powered by up to 144 of these chips, offer more than four times the compute performance of previous generations with similar improvements in energy efficiency. The message is clear: the hyperscalers are no longer content relying solely on Nvidia’s roadmap. They are building vertically integrated AI stacks, and that competition will reshape the entire compute ecosystem. This brings me to $ETN (Eaton Corp PLC) which remains one of the most essential infrastructure plays for the coming decade. US data-center power demand is expected to explode from roughly forty gigawatts today to 106 gigawatts by 2035. Legacy grids cannot keep pace with delays of up to four years and increasing instability. As a result, developers are shifting to on-site electricity islands with gas-turbine plants, battery storage, and high-efficiency cooling systems. Eaton sits at the center of this transformation. Whether the power source comes from the grid or from independent generation, Eaton provides the backbone: the precision cooling systems, the grid-interactive UPS architecture, and the electrical infrastructure that hyperscalers must deploy regardless of whose chips— $NVDA (NVIDIA Corporation) , $GOOGL (Alphabet Inc Class A) $AMZN or custom ASICs—fill the racks. As for sentiment, option flow by premium remains mixed, with 36.1% bullish versus 63.9% bearish. If you have questions or need reassurance, feel free to reach out.