Defense stocks plummet as investors worry possible Dem midterms win could thwart Trumps spending plans

Defense stocks have plummeted over the past few weeks as investors grow convinced Dems will emerge victorious in the midterm elections – potentially thwarting President Trump’s plans for huge military spending. The iShares US Aerospace and Defense ETF, the largest fund in the sector, fell 16% between the start of July and mid-October, as the Financial Times reported.The S&P 500, in comparison, rose 3.5% over the same period.Democrats have taken the edge among early and mail-in voters, according to state election data, while new polls show left-wingers have hit key thresholds in closely-watched Senate races in Texas and Alaska.Dems still face an uphill battle to win control of both the House and Senate.

But analysts say the midterms are cause for concern for defense investors since military spending has transformed into a partisan issue, the FT noted. Trump is angling to boost military spending by $500 billion, bringing annual defense spending from $1 trillion to $1.5 trillion.But that budget is subject to congressional approval – and Dems could easily take aim at his flashiest projects, like the “Golden Dome” or “Trump class” battleships.“Anything that has Trump’s name on it or the world ‘golden’ could be at risk,” Robert Stallard, a defense analyst at Vertical Research Partners, told the FT. Most top defense stocks traded in the red as investors bet worsening inflation, rising Treasury yields and a desire to reverse some of Trump’s other budget cuts will keep members of Congress from backing the military spending bump.Shares of Northrop Grumman, GE Aerospace, General Dynamics, Honeywell International dropped 1.3%, 0.8%, 0.5% and 0.1%, respectively, on Monday, deepening losses from the past few weeks.

Lockheed Martin closed slightly in the red. Some US defense stocks recovered recent losses on Monday, as Boeing rose 1.2% – though the airplane- and rocket-maker is still down 4.4% over the month. Despite the Russia-Ukraine war an...