Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
S&P 500 at Resistance Level, Downward Correction Ahead? - 17th Jan 19
Mauldin: My 2019 Economic Outlook - 17th Jan 19
Macro Could Weaken After US Government Shutdown. What This Means for Stocks - 17th Jan 19
US Stock Market Indexes Reaches Fibonacci Target Zone – Where to Next? - 17th Jan 19
How 2018 Was For The UK Casino Industry - 17th Jan 19
Gold Price – US$700 Or US$7000? - 16th Jan 19
Commodities Are the Right Story for 2019 - 16th Jan 19
Bitcoin Price Wavers - 15th Jan 19
History Shows That “Disruptor Stocks” Will Make You the Most Money in a Bear Market - 15th Jan 19
What Will the Stock Market Do Around Earnings Season - 15th Jan 19
2018-2019 Pop Goes The Debt Bubble - 15th Jan 19
Are Global Stock Markets About To Rally 10 Percent? - 15th Jan 19
Here's something to make you money in 2019 - 15th Jan 19
Theresa May to Lose by Over 200 Votes as Remain MP's Plot Subverting Brexit - 15th Jan 19
Europe is Burning - 14th Jan 19
S&P 500 Bounces Off 2,600, Downward Reversal? - 14th Jan 19
Gold A Rally or a Bull Market? - 14th Jan 19
Gold Stocks, Dollar and Oil Cycle Moves to Profit from in 2019 - 14th Jan 19
How To Profit From The Death Of Las Vegas - 14th Jan 19
Real Reason for Land Rover Crisis is Poor Quality of Build - 14th Jan 19
Stock Market Looking Toppy! - 13th Jan 19
Liquidity, Money Supply, and Insolvency - 13th Jan 19
Top Ten Trends Lead to Gold Price - 13th Jan 19
Silver: A Long Term Perspective - 13th Jan 19
Trump's Impeachment? Watch the Stock Market - 12th Jan 19
Big Silver Move Foreshadowed as Industrial Panic Looms - 12th Jan 19
Gold GDXJ Upside Bests GDX - 12th Jan 19
Devastating Investment Losses Are Coming: What Is Your Advisor Doing About It? - 12th Jan 19
Things to do Before Choosing the Right Credit Card - 12th Jan 19
Japanese Yen Outlook In 2019 - 11th Jan 19
Yield curve suggests that US Recession is near: Trading Setups - 11th Jan 19
How Unrealistic Return Assumptions Are Ruining Your Stocks Portfolio - 10th Jan 19
What’s Next for the US Dollar, Gold, Stocks & Bonds? - 10th Jan 19
America's New Africa Strategy - 10th Jan 19
Gold Mine Production by Country - 10th Jan 19
Gold, Stocks and the Flattening Yield Curve - 10th Jan 19
Silver Price Trend Forecast Target for 2019 - 10th Jan 19

Market Oracle FREE Newsletter

Bitcoin Analysis and Trend Forecast 2019

Why the US Navy Is the Best Sector to Invest in Now

Companies / US Military Sep 10, 2018 - 03:30 PM GMT

By: John_Mauldin

Companies BY ROBERT ROSS : Defense stocks are booming big time.

The iShares US Aerospace & Defense ETF (ITA) just hit an all-time high last week:




But this isn’t a one-off.

iShares US Aerospace & Defense ETF has delivered a return of 56.1% over the last two years. That’s nearly double the 30% S&P 500 return over the same period.

If we go back five years, iShares US Aerospace & Defense ETF jumped 132% versus the S&P 500 return of 72%.

My regular readers know defense is our top go-to sector for making safe profits.

I like defense stocks for several reasons. But their key advantage over other sectors is that their main customer is the US military.

The Industry That Never Quits

The US military is an awesome force.

It employs 2.2 million people. That’s more than the population of Wyoming, Vermont, and Alaska… combined.

To maintain this military force requires a lot of money.

The US will spend $700 billion on the military in this year alone. The next closest nations are China ($146 billion) and Russia ($69.2 billion).

The US spends so much on its military that the combined military budgets of China, Russia, Saudi Arabia, and India don’t equal even half the annual US defense budget.

The US spends 90% of its military budget on American companies. That means billions of dollars flow into publicly traded US defense companies.

But that’s not the only incredible thing about US military spending.

Defense Spending Never Gives Up

US defense spending almost never goes down.

The chart below shows US defense spending, with recessions highlighted in gray.



Source: St. Louis Federal Reserve

In five of the last six recessions, defense spending actually grew!

That’s very rare for any industry, and shows us that military spending is very stable.

During recessions, consumers spend less and businesses cut back investment.

That’s exactly what happened during the Global Financial Crisis. Between 2008 and 2009, US consumer spending fell 8.2% and domestic investment plunged 30.1%.

Yet, during this same period, the US hiked military spending by 12.2%.

This steady and reliable spending makes defense company profits very stable. It’s a major reason why the iShares US Aerospace & Defense ETF has crushed the S&P 500 during this bull market.

Now let’s look where the best investment opportunities lie in this sector.

Investing Behind the Sea Wall

Shipbuilding is my favorite segment.

The US has by far the largest and most dominant navy in world history. This enables the US to control both the Pacific and Atlantic trade routes. That’s a capability that Washington won’t soon give up.

To maintain this influence, the US invests heavily in its naval clout. Under the current US budget, Navy spending will rise 2.0% per year through 2022. That’s compared to the Air Force budget, which will decline 1.2% over that same period.

This stable outlook is good news for investors in shipbuilders. Since the government releases expenditures that look ahead five years, investors have a clear view of where its priorities lie.

And if you follow the money, it looks like the Navy will be a big winner.

John Mauldin Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules