President Trump’s decision to pour more money into the Pentagon will spark a revival of the defense industry especially with giants like Lockheed Martin, General Dynamics, Huntington Ingalls, and Boeing, according to a report from Moody’s Investors Service.
Two days after Trump unveiled his plan to boost spending 10 percent, Moody’s concluded, “We believe the base defense funding request provides a clear statement of intent to prioritize defense spending, lending further support to our positive industry outlook and confirmation of an improving market environment for defense contractors after the prolonged 2012-15 downturn.”
Defense spending, especially on big programs, has been stalled under the budget sequestrations during the Obama years.
The report said that if sequestration is lifted, “confidence in the longer-term defense budgetary trend would improve further. Under such a scenario, we believe agencies would be able to undertake new programs more aggressively, and contractors could more readily undertake otherwise riskier investments and company-sponsored R&D projects.”
The report also suggested that potential cuts in foreign aid will help contractors as U.S. allies arm up to make up for the loss of help from Washington.
The report said:
The proposed Trump bump in defense spending is thereby a doubly welcome development for industry participants. Elevated geopolitical tensions and rising security concerns are a global phenomenon that should also bolster industry coffers, more broadly. Reduced support for U.S. allies is also likely to lead to higher defense spending by these countries, as they increasingly need to defend their own borders. But heightened tensions related to a potential withdrawal of US support also pose the risk of curtailed purchases of US-made equipment and services.
Paul Bedard, the Washington Examiner’s “Washington Secrets” columnist, can be contacted at [email protected]
