The US midterm elections are a test of investor sentiment in the rapidly growing defense sector, market watchers said. President Donald Trump is seeking a more than 40% increase in the military budget to roughly $1.5 trillion, but how likely that survives depends a lot on Republicans keeping control of Congress. "That is a big risk," Sheila Kahyaoglu, a managing director in equity research at Jefferies Financial Group Inc., said on Bloomberg TV Wednesday.
The opportunities are there, according to those bullish on the sector, as war in Europe and the Middle East depletes stockpiles and legacy defense contractors struggle to refill them. "This administration has been supportive of public-private partnerships and that is an advantage for all players whether it is early-stage tech companies or more mature businesses," said Ward Mc Nally, founder and managing partner of Mc Nally Capital, a Chicago-based private equity firm.
The new technologies used in conflict zones, such as drones, are another area of interest for investors as is the parts and supply chain of the defense sector. "Everything from raw materials to metal components to defense electronics at the top of the list," said Anita Antenucci, founder and managing partner of 3Wire Partners, an advisory and merchant banking firm.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing