U.S. defense stocks may see gains as President-elect Donald Trump returns to the White House, analysts at Bernstein said in a report on Monday. Increased military expenditure could help Lockheed Martin (LMT, Financials), and other defense stocks, therefore, will potentially benefit under the regime.
Trump will likely maintain a robust military posture like his first term while avoiding global confrontations, according to Bernstein analyst Douglas Harned. Harned said Trump has stressed nuclear deterrent, missile defense, and space capabilities.
The new Department of Government Efficiency, led by Tesla CEO Elon Musk and SpaceX founder Musk, may target military expenses. Bernstein observed that military equities underperformed the market since the election.
Harned also said that Elon Musk has not stated any serious difficulties for large military firms, despite headlines. Harned was skeptical of large cost decreases, given ambitions to simplify contracting and encourage private competition.
Harned said Russ Vought’s selection as OMB director might herald expenditure cuts. Vought, who co-authored “Project 2025” to restructure the government, headed the OMB during Trump’s first term.
Trump’s first year in office saw defense stocks rise. Harned added that although a corporate tax reduction boosted equities during Trump’s prior tenure, export demand is unique this time. Even if Ukraine tensions lessen, U.S. and European military manufacturers may gain from increasing demand in Europe owing to Russia security worries.
This article first appeared on GuruFocus.