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Bellicose campaign rhetoric is sending defense stocks soaring

Homeland security is one of this election's most hotly debated issues, and traders believe the issue will help defense stocks soar even higher.

"For the first time, these applause lines have [centered on statements that say] defense postures need to be rebuilt," Crossing Wall Street editor Eddy Elfenbein said Monday on CNBC's "Trading Nation." "We see threats from people like Putin [and] trouble in China, people realize that maybe some of the cutbacks since the end of the Gulf War have gone too far. We need to work on rebuilding our defense."

Since the beginning of election season, candidates on both sides have spoken extensively about the need to strengthen the American military. Presumptive Republican presidential candidate Donald Trump has promised that "we will spend what we need to rebuild our military" because "our military dominance must be unquestioned." Hillary Clinton pledges to "ensure the United States maintains the best-trained, best-equipped, and strongest military the world has ever known," according to her campaign's website.

As a result, defense is not just on voters' minds, but on investors' as well.

"There's been a lot of talk lately that the U.S. defense posture needs to be beefed up a little bit," Elfenbein said. "A lot of the planes, a lot of the ships are outdated and they need to be modernized. [When you look at] stocks like Lockheed Martin and Northrup Grumman, they've been on a strong uptrend lately and I think given the fundamentals and given the talks, it's likely that that trend will continue."

"The way I think investors are thinking about this election is infrastructure [spending] is going to go up no matter who gets elected. Defense is going up no matter who gets elected," Daniel Clifton, head of policy research at Strategas, said in a recent interview with CNBC.com.

Lockheed Martin and Northrup Grumman have risen 11 percent and 15 percent in the past two months, respectively.


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