Why defence Company Stocks Are Soaring Through The Sequester

Despite threats of Armageddon from defence contractors and the Pentagon, sequestration hasn’t slowed down the industry at all.

While major companies like General Dynamics and Lockheed initially showed losses back in February, now that the automatic cuts kicked in on March 1, the heavy hitters have been able to soar above market averages.

From The Hill:

While the S&P is up 3.7 per cent and the Dow Jones industrial average has risen 4.3 per cent, Boeing has jumped 9.6 per cent, Lockheed Martin is up 8.3 per cent. Northrop Grumman has climbed 6.1 per cent and Raytheon is up 6 per cent. 

Rich Smith, a contributing writer to The Motley Fool, put together a good video explaining the difference between rhetoric and reality.

“All the people who have been telling you the defence companies are toast are wrong,” Smith says in a video posted Apr. 5. “The U.S. government is still spending like drunken sailors, soldiers, Marines, and airmen.”

“There was a great deal of fear about sequestration, and some of that is proving a bit overdone,” Richard Aboulafia, a defence analyst at the Teal Group, told The Hill. “While it’s a softer budget outlook, it’s still a very big market. It’s not as though we’re experiencing the same kind of drawdown we saw after the Cold War.”

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