As piles of corpses mount in the Middle East, weapons investors are laughing all the way to the bank.
So reports Bloomberg, citing the ongoing zoom in defense stocks: “The S&P 500 Aerospace & Defense Industry Index has already climbed 20% this year and is hovering near a record. If the advance holds through the end of 2024, that would mark the largest such increase since 2019 ... .Cash has poured into the $6.3 billion iShares US Aerospace & Defense ETF this month as well. The fund is already looking at its biggest inflow since April and trades a whisker away from an all-time high.”
Powering the climb has of course been “escalating global tension,” Thus October 1, when news came of an impending Iranian missile strike against Israel, was an especially bountiful day. Leading the pack have been defense primes (Lockheed, RTX (formerly Raytheon,) Northrop Grumman, and naval shipbuilders Huntington Ingalls reporting larger than expected profits. Naturally, underperformance is no barrier to rich reward; the $14 billion Enterprise aircraft carrier under construction by Huntington is running at least two years behind schedule. while Lockheed is delivering F-35 fighters that cannot be used in combat for lack of necessary software upgrades.
Despite the rich rewards already garnered, the future looks even brighter. As Bloomberg noted, “If the Oct. 1 jump in aerospace stocks..is any indication, investors aren’t largely pricing in a full-fledged escalation in the Middle East. Another flare-up could spur more share gains.”
Of course, this cornucopia has been enabled by the Biden Administration’s unstinting supply of U.S. weapons to Israel for its extermination campaigns in Gaza and now in Lebanon, a process assiduously promoted by the arms industry. A searing October 4 report on the arms flow by ProPublica noted that the weapons flow has not been entirely spurred by simple love of Israel: “Defense contractors and lobbyists have.. helped push along valuable sales by leaning on State Department officials and lawmakers whenever there’s a holdup.”
Needless to say, there is zero threat to the gold rush from intervention by voters. Although polls indicate that a majority of Americans favor a halt in arms supplies to Israel, and show little appetite for escalation in Ukraine, Bloomberg refers reassuringly to “the sector’s relatively low risk when it comes to the US presidential election.”
Once upon a time, politicians dared to speak plainly. Launching the Special Committee on Investigation of the Munitions Industry in 1934, Senator Gerald Nye of North Dakota, a Republican, declared that “war and preparation for war is not a matter of national honor and national defense, but a matter of profit for the few.”
Such talk would of course be deemed totally impermissible today.