The Top 5 Ways to Trade the Proposed $750 Billion Defense Budget

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Donald Trump seems to have the Midas touch.

A simple mention of infrastructure, cyber security, biotech, and even defense is enough to boost related stocks. There’s no doubt about that.  We’ve seen it with our own eyes.

For example, in mid-2017, defense stocks rallied after the President signed a weapons deal with Saudi Arabia worth nearly $350 billion over the next decade.

  • Raytheon (RTN) ran from $156 to $210
  • Boeing (BA) ran from $175 to nearly $350
  • General Dynamics (GD) ran from $191 to $230
  • Northrop Grumman (NOC) ran from $243 to nearly $345

Days after that, the President asked for a $668 billion defense budget for 2018.

That money would be used to fund the Defense Department’s budget to $574.6 billion, buy six ships, new fighter jets, 15 new KC-46 air tankers, which are used for aerial refueling and help grow the U.S. military by another 56,000 new service members.

The news sent related defense stocks even higher.

Then, in early March 2019, the President said he would submit a budget to Congress that included a request for $750 billion for fiscal year 2020.  As a result, stocks like Boeing (BA) have since jumped from about $365 to $380 on the news.

General Dynamics (GD) has run from about $165 to $170.

While other stocks like Raytheon (RTN) and Northrop Grumman (NOC) have remained flat on the news so far, we expect that to change, as we near a decision on a finalized defense budget.

Within the budget, more than $718 billion of that would go to the Pentagon – a year over year increase of $34 billion.  That includes $31 billion to modernize our nuclear facilities, in addition to funding for a Virginia-class submarine, and 78 F-35 jets from Lockheed Martin.

The President also requested $13.6 billion to upgrade existing missile defenses and begin the development of space-based weapons to counter hypersonic missile threats.  After all, Russia does have a missile that can travel at nearly two miles a second, or 6,138 miles an hour– unstoppable even with today’s air defense systems.

Some of the top stocks to watch as we near the defense budget include:

  • Raytheon (RTN)
  • Boeing (BA)
  • Northrop Grumman (NOC)
  • The iShares U.S. Aerospace & Defense ETF (ITA)
  • The PowerShares Aerospace & Defense ETF (PPA)

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