So much for that idea. One theory we’d heard a few times was that the defence stocks would get slammed if there were no Fiscal Cliff deal, since the spending “sequestration” caps defence spending below where the industry and many in government would like it.
But no dice. There’s just a few days until the Fiscal Cliff is “hit” and defence stocks (as measured by the ITA ETF) are near their highs of the year.
It’s possible that the market is still mostly pricing in a deal, but you’d think it would at least be an undeperformer, given the wave of pessimism. Bigger point: Obvious ideas frequently won’t end up working how you suspect.