The Trump administration released its 2020 budget this week. It proposes a 4.7% increase over current spending, which is double the 2.4% increase which the Defence Department had planned for. The dollar amount of the increase is $34 billion, while the Pentagon had requested $17 billion in additional spending.
There is certain to be opposition for aspects of the budget from the Democrat House majority, but increased defence spending has grown into a nonpartisan issue. The Democratic leadership embraced the increase in military spending last year as part of a compromise.
There will be a fight over wall spending in the service of political theatre, but it is quite possible that the 4.7% increase in defence spending makes it through unscathed.
Raytheon (TSX:RTN) stock was down 1.22% in late afternoon trading on March 12. The stock has climbed 18.7% in 2019 so far. In 2018 the company saw net sales rise 6.7% year-over-year to $27.1 billion. Books surged 16% to $32.16 billion. Raytheon stock has fallen into a more favourable price range in recent weeks, which should pique investor interest.
Lockheed Martin (NYSE:LMT) stock was down 0.97% in late afternoon trading. Shares have climbed 16% in 2019. The largest defence contractor in the world will continue to reap the rewards of an aggressive spending program from the United States.
If this budget goes through, the US defence spending budget will be larger than the next 14 countries combined. Lockheed stock has dipped back into neutral territory, making it an interesting target in the middle of March.
