Defense stocks would do better under Kamala Harris than Donald Trump, analysts say
Defense stocks would fare better under a Kamala Harris administration than a second Donald Trump term, according to analysts at investment banking firm Jefferies (JEF).
Under Trump, a renewed focus on strengthening alliances by strong-arming them into paying their fair share would be the biggest red flag — and negative — for defense sentiment, analysts led by Sheila Kahyaoglu, wrote in a note Tuesday.
“The biggest difference is support for U.S. allies, with likely elevated risk to ongoing supplementals under a Donald Trump administration and broader uncertainty with regard to alliances given Trump’s stance to make allies pay more,” they said. “Investor sentiment for defense has a negative bias in a Trump win.”
Read more:How an election win for Donald Trump or Kamala Harris will affect stocks
Concerns over Trump’s commitment to multilateral organizations, namely the North Atlantic Treaty Organization (NATO), raise questions about what Department of Defense policies could look like under a second Trump administration.
During his first term, Trump reportedly discussed pulling out of NATO — the 75-year-old military alliance between the U.S., Canada, and several European nations — if other member countries didn’t up their spending.
In 2014, NATO Heads of State and Government agreed to commit 2% of their national gross domestic product (GDP) to defense spending, although many countries continued to fall short of that threshold. Meanwhile, the U.S. currently spends about 3.5% of its GDP on national defense.
This year, 23 of the 32 member nations are expected to meet or exceed that target, up from just three in 2014.
Russell Hackmann, president at Hackmann Wealth Partners, told Quartz that Trump is seen as “more anti-war and therefore that’s worse for the defense stocks.” These include companies like Northrop Grumman (NOC), Raytheon (RTX), Boeing (BA), and Lockheed Martin (LMT).
That perception stems in large part because of the former president’s defense policies, which center on what’s known as “peace through strength” — the idea that the U.S. can prevent war by being prepared for it. That includes reviving the Defense Industrial Base and efforts to “prevent World War Three, restore peace in Europe and in the Middle East, and build a Great Iron Dome Missile Defense Shield over our entire Country,” according to the 2024 Republican Party platform.
Trump has criticized the Biden administration over Russia’s February 2022 invasion of Ukraine, claiming that he can quickly put a stop to the ongoing war in Europe.
The Republican candidates also told reporters in August that he encouraged Israeli Prime Minister Benjamin Netanyahu to “[g]et your victory and get it over with,” adding that the killing in Gaza “has to stop.”
On the other hand, a Harris administration would likely be a continuation of Biden-era defense policies, “with unwavering support for U.S. security,” Jefferies analysts said.
The Biden-Harris Administration in March submitted to Congress a proposed budget request of $849.8 billion for the Department of Defense for the 2025 fiscal year — a 1% annual increase. In April, Biden signed into law a $95 billion supplemental security bill that includes military aid to Israel, Ukraine and Taiwan.
Harris would likely continue the Biden administration’s efforts to expand alliances, positioning herself as a strongly pro-NATO candidate. Some Biden-era efforts included added military presence in the Indo-Pacific as part of its strategy to counter China in the region. Similarly, the AUKUS partnership between U.S., U.K. and Australia was aimed at integrating defense industrial bases around nuclear-powered submarines and increased technological cooperation.
Jefferies analysts noted, however, that they don’t expect “any immediate change to defense under either candidate,” given that there will likely be a policy and budgetary lag.
