A New Presidency... A New Arms Race
Let's face it: a lot has been assumed, predicted, postulated, and inferred about the future of the economy now that the Trump presidency is just 24 hours from its official kickoff.
Analysts have been screaming about everything from DOW 30,000 to total global economic collapse and everything in between ever since Trump took the lead as the GOP's candidate.
The truth is, it's hard to tell what's real and what's smoke and mirrors these days. Yes, Trump is both a Republican and a businessman, which can lead a perfectly rational mind to make some snap judgments about what his administration will back once the ball gets rolling.
Most of those snap judgments are just that: snap judgments. We'll never really know what the long-term effects of his tenure will be until we live to see them.
That said, there is one fairly safe assumption that can be made based on both his political leanings and the statements he's made publicly since well before the now-historic November 8th shocker.
Carry a Bigger Stick
Trump will be good for the military. More specifically, he will be good for the large defense contractors that keep the enormous U.S. military industrial complex chugging along.
He's talked about building up America's nuclear arsenal quite openly, even tweeting his new policy in 140 characters or less just a few weeks after winning the Oval Office.
“The United States must greatly strengthen and expand its nuclear capability until such time as the world comes to its senses regarding nukes,” he wrote back in December.
He's indicated a similar stance on the U.S. Navy — already by far the largest and most powerful in the world.
His plan involves growing the Navy to 350 vessels, up from 274 today, which would make it the biggest such expansion since the Cold War.
All told, his aggressive pro-military stance could end up costing U.S. taxpayers an additional $500 billion per year, bringing the total annual DoD bill past the $1 trillion threshold for the first time ever.
This would include more fighters for the Air Force (albeit not the F-35, which he's criticized for being overpriced), more soldiers into the Army (his early statements called for an additional 90,000 personnel), as well as the aforementioned enhancements to the Navy and the nuclear arsenal.
Trump has been somewhat less than predictable in terms of his actions, even in the weeks leading up to his inauguration, which leads me to think that his plans and promises might not all pan out exactly as advertised. But one thing is for sure...
The companies supplying this hardware are not likely to see a bearish trend in the near future.
Here are just a few of the prospective beneficiaries of the incoming Trump administration.
And the Winners Are...
Lockheed Martin (NYSE: LMT), the world's biggest defense contractor based on dollar value, is always a usual suspect during periods of military buildup.
Though its F-35 project, the most expensive single weapon development program in history (close to $1.5 trillion in total costs by the time all units are delivered), found itself in Trump's personal crosshairs several weeks ago, the company's varied interests still position it quite well for the incoming expenditures.
The company produces ballistic missiles, combat ships, lasers, robots, satellites, armored vehicles, and everything all the way down to precision-guided munitions.
Those munitions, while relatively small-ticket items compared to large oceangoing vessels, are a major source of revenue by virtue of their one-time-use nature.
Nobody goes through smart bombs and missiles the way our Navy and Air Force do... nobody. And for each cruise missile or bunker buster that atomizes its target in faraway lands, you'd better believe that a replacement is already on order.
Ballistic missiles — the longest-ranged weapons we have, and capable of carrying nuclear warheads — are destined to be one of Trump's personal favorites (especially with Russia already enhancing its own arsenal).
Another in the lineup is Boeing (NYSE: BA), a company that's been producing ballistic missiles since the 1950s and continues to contribute to the maintenance and modernization of the American nuclear arsenal to this day.
Boeing and Lockheed both build aspects of the Minuteman III missile, the mainstay of the U.S.'s ground-based ballistic missile arsenal.
The company also builds a slew of cruise missiles, both conventional and nuclear-capable, and over a dozen unmanned aerial vehicles and dozens of traditional aircraft, including the president's own personal ride, the 747-based Air Force One.
In a bit of a plot twist, Boeing is also the company behind some of the DoD's most promising anti-ballistic missile technology, namely the ground-based midcourse defense system, designed to hit incoming enemy warheads in space.
Given his fixation on Putin's expanded missile development program, it's not likely that Trump will cut funding for this defensive solution — a program that is already costing taxpayers $40 billion.
Another big name to keep your eyes on is Raytheon (NYSE: RTN).
This one is a bit different in that it produces subsystems for a variety of systems covering all potential theaters of combat, up to and including space.
Raytheon's bread and butter is sensors and semi-conductors, which go in universally important gadgets like radars and communications systems.
These are the essential building blocks of any modern military, and they will be getting more and more relevant with each successive generation of devices... until we go back to bashing each other's heads in with rocks and stabbing each other with sharpened sticks.
The company is perhaps most famous, however, for its long list of missiles.
The AMRAAM (advanced medium-range air-to-air missile) is the current mainstay for NATO's combat aircraft, and the AGM-65 Maverick occupies the same position of dominance in the air-to-surface role.
The Patriot surface-to-air missile is another famous Raytheon product, and when it comes to wider-scale destruction, the BGM-109 Tomahawk is NATO's most popular cruise missile.
Put more succinctly, if you're going to get blown up by an American-built guided missile, it will most likely be one with the Raytheon logo stamped on it.
Just like Lockheed, this category of weapons, which can only be used once, benefits Raytheon's bottom line immensely whenever political turbulence heats up into armed conflict.
Can Preparing for War Help Ensure Peace?
All in all, the defense industry and its thousands of contractors and subcontractors have a lot to look forward to from the incoming administration.
Whether or not this buildup of manpower and material will lead us on a path to more wars remains to be seen, of course, but as of this moment, I doubt very highly that any insiders at these companies will be dumping shares anytime soon.
Does this mean you should follow in their footsteps? Perhaps it does.
Oval Office policy is one of the rare catalysts that is both predictable and enduring.
With little to stop Trump from making good on his campaign promises (at least with regard to military spending), it's very likely that these favorable conditions will follow the defense industry around for at least the next four years.
Fortune favors the bold,
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