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Are Defense Stocks in Trouble?

Last week President elect Trump criticized Boeing for the two next generation Air Force One presidential jets costing $4 billion. No matter that there is only a contract for design and no contract for building jets to replace the aging Boeing jets that carry the president. Boeing stock fell briefly anyway. Then this week Mr. Trump criticized the F-35 joint strike fighter jet program as having costs out of control. And now Lockheed Martin, United Technologies and BAE systems stocks are trading lower. The Wall Street Journal discusses the effects on defense stocks as Trump targets the F-35 program.

President-elect Donald Trump took aim at one of the Pentagon’s costliest programs on Monday, saying on Twitter the “program and cost” of the F-35 Joint Strike Fighter “is out of control.”

“Billions of dollars can and will be saved on military (and other) purchases after January 20th,” Mr. Trump wrote on Twitter, referring to the day he is sworn in as president.

Just about every defense contractor except Boeing has exposure to the program. Northrop Grumman Corp., a major F-35 supplier, lead an early slide in defense stocks after the president-elect’s latest attack on industry costs. Lockheed Martin and F-35 suppliers United Technologies Corp. and BAE Systems PLC were also lower.

It is not at all certain how Mr. Trump will deal with the cost of advanced military weaponry. However, investors do not like uncertainty and that hurts stock prices. Are defense stocks in trouble or is this  just more hype by the President elect prior to assuming the office? Or is this sort of uncertainty going to follow contractors into other arenas?

Selling Jets to Iran

In the aftermath of the Iran nuclear deal Western companies are hoping to do business with Islamic country as it reopens contacts with the West. Boeing has a new $17 billion Iran deal to sell jets.

Boeing Co. clinched a deal to sell 80 jetliners to Iran, completing the first major agreement between a U.S. company and the Islamic Republic, just as the political winds are changing.
Planned aircraft sales by Chicago-based Boeing and European rival Airbus Group SE to Iranian carrier Iran Air are among the most high-profile transactions signed since Iran and Western powers concluded a nuclear accord that removed sanctions on Tehran. U.S. officials cleared the way for Airbus and Boeing to start contract talks in September.

Now, Western executives are trying to figure out whether President-elect Donald Trump will step in to slow, or stop, the tentative approaches many companies have already made.

Considering that Trump has been extremely critical of the Iran nuclear deal, will he cause deals like the purchase of American jets by Iran to fold up and go away? For a man who campaigned on bringing jobs back to America it seems nonsensical that he would muddle up the sale of jets by an American company or any similar deals as contracts between American companies and Iran move forward. However, Mr. Trump has come this far by being unpredictable. That does not bode well for stocks, especially in the defense sector. Read our article about stocks that are at risk despite the Trump stock rally.

Are Defense Stocks in Trouble? PPT





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