Although many feared widespread defense spending cutbacks as President Barack Obama took office, two ongoing wars could keep spending high and benefit exchange traded funds (ETFs), too.
Here are some points in favor of the aerospace and defense industy:
- Defense Industry Daily says that momentum had been building to sell the F-22A Raptor overseas to countries considered allied with the United States, such as Japan. But F-22 production is set to end sometime around 2010; exporting them could delay the need to make a decision. As far as Japan goes, the F-22 “is at the top of their list.”
- Mike Allen for San Diego Business Journal reports that this industry could be one of the major employment opportunities in the United States. General Atomics, which makes the unmanned drones used extensively in the Middle East wars, has added 800 jobs in the past year.
- Meanwhile, the Navy plans to commission a new amphibious assault ship, the USS Makin Island, this week, and next year the USS Carl Vinson becomes the third aircraft carrier to be home-ported locally.
- The ongoing strife in Afghanistan has led to a dilemma for Obama, who needs to decide whether to send more troops. If troops are increased again, it could keep defense spending elevated. Also worth noting is that, according to Martha Raddatz at ABC News, the troops that were part of the increase ordered in February are still not there yet. This is because the military needs time to organize the supplies these additional forces will need.
On the downside, Boeing (NYSE: BA) reported a $1.6 billion loss in the third quarter, thanks to delays in the 787 Dreamliner program.
For more stories about aerospace, visit our aerospace and defense category.
- PowerShares Aerospace & Defense (NYSEArca: PPA): up 16.9% year-to-date
- iShares Dow Jones U.S. Aerospace & Defense (NYSEArca: ITA): up 17.3% year-to-date
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.