U.S. defense stocks have been riding high ever since President Trump entered the Oval Office.
Impressively, the Zacks Aerospace sector, which includes the U.S. defense biggies, has gained 18.1% in 2019 so far compared with the S&P 500’s increase of 14.3%.
Let us now discuss in brief the growth catalysts that will continue to drive U.S. defense stocks’ rally as the year progresses.
A Solid Budget for Fiscal 2020
Trump proposed defense spending of $750 billion last month for fiscal 2020. This new plan reflects a solid 5% increase from the nation’s existing defense budget. No doubt, on approval, this budget would significantly boost the profit of U.S. defense biggies.
Notably, the proposed budget provisions $165 billion for Overseas Contingency Operations (OCO) (as reported by CNN), an account that pays for military operations overseas in places like Afghanistan, Syria and Iraq. If approved, this would mark a striking increase from the 2019 budget, which sought $69 billion for that operational account. As major U.S. defense companies continue to expand their international presence, such a significant increase in OCO provision will certainly boost their businesses across the globe. more