Shares of defense contractors on the rise
Well what do you know, masters of war are getting rich.
### via Daily Beast
There are certain reactions in the financial market that we’ve come to expect whenever new hostilities break out and ramp up in the Middle East. With the situation in Syria escalating, some of these effects have already been seen. The price of oil rises.Yields on treasury bonds fall as investors move towards safer assets. Riskier assets, like stocks, tend to value in value. People take on a sort of “prevent defense” mindset, not wanting to get beaten. But there’s one group of stocks that tends to be safe from wartime stress: defense contractors.
As the chart above shows, shares of Raytheon Company and Lockheed Martin Corporation, two major defense contractors, have been on a strong upward trend over the last six months, and have done quite well in the last few weeks. They have risen 38 percent and 38 percent, respectively, and are outperforming the Standard & Poor’s 500 by a large margin. For comparison, the S7P 500 has risen 8.59 over the same time period. The chart shows that around May a larger gap began to grow between these defense contractors and the S&P 500. And this divergence is taking place even as defense spending is being cut due to the sequester.