Republican sweeps have led to strong gains in defense stocks in the past. However, that may not be the case this time. Wells Fargo analyst Matthew Akers said defense historically has performed better when Congress and the executive branch are controlled by a single party — especially Republicans. He noted that under Republican-controlled administrations, the industry outperformed the S&P 500 by more than 12 percentage points. Under Democratic-led administrations, the index has outperformed the broader market by nearly 6 percentage points. Polls show that former President Trump has an advantage over President Joe Biden in the election. However, Akers believes the defense sector may not benefit if Republicans sweep away this election cycle. The analyst said Trump’s skepticism toward NATO could mean less weapons funding for Ukraine. Republican control of both branches of the legislative branch could lead to budget cuts to federal IT revenue — something that, of course, Akers said could be difficult unless the Republican majority is stronger than current polls indicate. “Even with a majority, R leaders need to thread the needle between the two. [the] The House Freedom Caucus on the right and enough Senate Democrats (40+) on the left to block the budget without a fair allocation of non-defense funding. Akers wrote in a note on Tuesday that the defense and non-defense sectors are likely to see another two years of low growth. “The United States exports goods to China and has become a target of ongoing trade tensions between the two countries,” said Cox. However, TD Cowen believes that the opposite situation may occur. favorable. Cowen wrote in a note that the iShares U.S. Aerospace & Defense ETF (ITA) has lagged this year, citing the Republican platform emphasizing a “strong military,” restoring peace and “Made in America” defense systems. on the market. ITA .SPX YTD Mountain ITA Year to Date
