Bernstein stated on Wednesday that investors should hold off on buying the recent selloff in U.S. defense stocks until after the November midterm elections, seeing the vote as a potential clearing event for the Analyst Douglas Harned noted defense shares have fallen sharply since the start of the war in Iran, swinging from a 15% premium to the S&P 500 in February, when President Donald Trump’s $1.5 trillion DoD budget proposal was in focus, to a 12% discount, as Congress struggles to complete a budget.
He had been skeptical the conflict would lift spending needs but said the stocks had still fallen further than expected.
“The budget is stalled,” wrote Harned, with neither the House nor Senate having passed an appropriations bill, and the House now in recess until after the midterms.
Bernstein warned that a continuing resolution through Dec. 11 would be more onerous than prior ones, effectively locking funding at 2026 levels and adding risk to growth areas such as tactical missiles and interceptors, where inventories are already low.
Harned pushed back on fears that Democratic wins would hurt defense spending, saying history does not bear that out, and expects the 2027 investment budget to rise more than 10%, a positive for the shares.
"We see the November 3rd elections as a clearing event and likely a good time to move into these stocks," he wrote.
For now, though, he is cautious, stating: "We see little urgency to buy US defense before November."
#S&P500
He had been skeptical the conflict would lift spending needs but said the stocks had still fallen further than expected.
“The budget is stalled,” wrote Harned, with neither the House nor Senate having passed an appropriations bill, and the House now in recess until after the midterms.
Bernstein warned that a continuing resolution through Dec. 11 would be more onerous than prior ones, effectively locking funding at 2026 levels and adding risk to growth areas such as tactical missiles and interceptors, where inventories are already low.
Harned pushed back on fears that Democratic wins would hurt defense spending, saying history does not bear that out, and expects the 2027 investment budget to rise more than 10%, a positive for the shares.
"We see the November 3rd elections as a clearing event and likely a good time to move into these stocks," he wrote.
For now, though, he is cautious, stating: "We see little urgency to buy US defense before November."
#S&P500