Shares of US Defense Contractors not amused.
Something funny happened on the way to the bank for investors who were trying to cash in on President Trump’s trip to Saudi Arabia and the $110 billion for US defense contractors that White House Press Secretary Spicer had touted on May 20 as the ‘largest single arms deal in US history.’
The stocks of defense contractors had already soared over the past two years, with Lockheed Martin (LMT), Northrop Grumman (NOC), General Dynamics (GD), and Raytheon (RTN) up between 52% and 72%. But from Friday, May 19, through the end of the month, they got a big extra push of 5% to 6%.
But since then, they lost ground. The magic is gone. What happened?
Friday, May 19, President Trump departed for Saudi Arabia. And it appears a list of the ‘deals’ to be announced that weekend was already being circulated, and folks got busy buying up those stocks even before Trump stepped on the plane that afternoon.
Then on May 20, in Riyadh, a laundry list of deals was announced, including that ‘largest single arms deal in US history.’ The following Monday and over the next days, the shares of defense contractors rose further, powered by visions of $110 billion in deals raining down on them.
This post was published at Wolf Street on Jun 8, 2017.