The big defense firms already had predicted good times ahead no matter who won the election, and the expectations of a bonanza of defense spending soared on Donald Trump’s first day as president-elect.
Even as the market initially tanked Wednesday on word that Trump had won, stocks for Lockheed Martin Corp., Northrop Grumman Corp., General Dynamics Corp., Boeing Co., Huntington Ingalls Industries Inc. and others bucked the trend and were posting major gains.
The market then rallied and the Dow Jones industrial average closed at a record high of 18,807.88.
In late October, when polls showed that Democratic candidate Hillary Clinton was likely to win, Northrop was touting solid third-quarter earnings as a sign of more profits ahead for the defense industry.
“It is an interesting time in that it’s clear that there’s a significant re-capitalization wave that’s underway across a number of our customer communities,” Northrop Chief Executive Officer Wes Bush said. “Quite frankly, it’s one that’s been deferred for quite a long time.” The company last year won the contract to build the new B-21 Raider stealth bomber for the Air Force.
Since the Trump victory, defense industry analysts have predicted defense spending would surge as the new White House administration and the Republican-controlled House and Senate move to end the sending caps known as sequestration under the Budget Control Act of 2013.
In a post for Forbes, analyst and Pentagon consultant Loren Thompson said “it appears the Obama-era drought in Pentagon demand for new weapons is over.”
“Combined with Republican retention of majorities in both chambers of Congress, Trump’s win signals that the gridlock restraining increases in defense outlays will soon disappear,” said Thompson, chief operating officer for the non-profit Lexington Institute.
Thompson and other analysts pointed to Trump’s campaign pledges to boost the size of the Army and the Marine Corps, add 1,200 fighter aircraft to the Air Force and increase the size of the Navy to 350 ships.
In addition, Trump has argued to speed up the modernization of the nation’s nuclear force to include replacements for the aging Minuteman III Intercontinental Ballistic Missiles and a new class of ballistic-missile submarines.
In a September campaign speech, Trump said, “We currently have the smallest Army since 1940. The Navy is among the smallest it has been since 1915, and the Air Force is the smallest it has been since 1947.”
Trump vowed a turnaround, but how he would pay for it was unclear beyond general pledges of “common sense reforms that eliminate government waste and budget gimmicks.” Whether the spigot of defense funding opens and becomes a bonanza remains to be seen.