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President Trump Likely to Bump the Aerospace & Defense Sector

iBASEtAerospace & Defense blog Predictions & TrendsPresident Trump Likely to Bump the Aerospace & Defense Sector

Dec

8

President Trump Likely to Bump the Aerospace & Defense Sector

To get a sense of how the election of Donald Trump is likely to affect the Aerospace & Defense sector, one need look no further than Wall Street the day after the election. Defense stocks surged appreciably, with many running to record highs in anticipation of a Trump administration and Republican-controlled Congress. As noted in MarketWatch, “The iShares U.S. Aerospace & Defense exchange-traded fund ITA powered up 4.3 percent to a record close, with 34 of 37 equity components trading higher. That outperformed the broader stock market.” Further, major defense companies with large market capitalizations (e.g., Northrup Grumman, General Dynamics, and Raytheon) all surged, closing at all-time highs.

Stock Price Percent Change Over Time

Aiming for a Defense Budget Increase

What lies behind this rise is the belief that President-elect Trump and the Republican Congress will undo the budget sequester, taking the shackles off military spending. Elsewhere, an article in Forbes contends that Trump is likely to boost military spending by $500 billion to $1 trillion. That piece cites a Huffington Post column in which Todd Harrison of the Center for Strategic and International Studies points to what Trump’s plan for an invigorated defense sector might cost:

What we do know is that Trump has been drawing many of his defense proposals from the National Defense Panel and the Heritage Foundation. Both of these organizations have advocated for returning the defense budget to the levels proposed in the FY 2012 budget request (the so-called Gates budget). Without any other details from the Trump campaign, I think this is a good ballpark estimate for what Trump is aiming for in terms of the defense budget. The FY 2012 request is about $800-900B higher over 10 years than the most recent president’s budget request.

Building a Stronger Military

During the campaign, Trump called for 90,000 more Army soldiers, a 350-ship Navy, 100 more aircraft fighters, and strengthened nuclear and missile defense.

The Navy projection alone would be very expensive, with increased spending on big-ticket items such as aircraft carriers and attack submarines.

The Air Force Times writes that the defense-spending boom under Trump is likely to mean significantly more airmen and planes. Trump has said that he would adopt the Heritage Foundation’s proposal to boost the Air Force’s fighter aircraft to at least 1,200. (The Air Force now has a little more than 1,100 fighters readily available for missions, though all told it has nearly 2,000.)

Underscoring all this discussion is the likelihood that business in Washington will be conducted differently after January 20. As Forbes notes:

Congress will be filling out, not cutting back, the Trump defense budget. Obama used his veto to balance defense and domestic spending. That balance is dead. Moreover, there is bipartisan support for big defense spending. So in the Senate, while there might be a unified Democratic filibuster on some kinds of extreme domestic legislation, there would not be one in opposition to defense spending.

Even taking into consideration the U.S. Senates push for more controlled spending by the Pentagon and Trumps genuine desire to provide taxpayers more for less — “I’m gonna build a military that’s gonna be much stronger than it is right now. But you know what? We can do it for a lot less,” said then presidential candidate Trump on NBC’s Meet the Press — manufacturers serving the A&D sector need to get ready for anticipated growth, assuring they have the systems and processes in place to accommodate what looks to be a boost in demand not seen in decades. Those that gear up and embrace smart manufacturing approaches, sooner rather than later, will be best positioned to take advantage of the looming opportunity.

 


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About Tom Hennessey

Tom brings over 25 years of enterprise software marketing experience to bear in directing the transformation of the company’s marketing function. As a Vice President of Marketing, Tom is leading to expand iBASEt’s Marketing and Business Development efforts. By providing educational content and customer-focused programs, he encompasses a culture of measurable returns. Tom earned his MBA at the University of Southern California and holds a BS degree in Management from Northeastern University.

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