On Oct. 1, President Donald Trump once again took to Twitter to attack Kim Jong-un, saying that negotiating with the North Korean chairman is a waste of time. While social media mudslinging may not be the best way to deal with a hostile leader, there's at least one group who may not mind Trump's Twitter threats: defense industry investors.
Year-to-date, the S&P 500 Aerospace and Defense Industry subsector index is up 30 percent, compared to 12.9 percent for the S&P 500. Since July 3, when North Korea fired its first intercontinental ballistic missile and Trump said in a tweet, "Does this guy have anything better to do with his life?" the index has climbed by 14.3 percent.
While most people likely don't want to go to war with North Korea, the increasingly heated rhetoric is helping many defense-industry stocks reach record highs.
"The more people that are nervous and afraid of what's going to happen in the world, the more it drives multiples higher," says David Chung, a research analyst at Janus Henderson Investors. "What we've seen in the last month with North Korea elevates that uncertainty."
As high as these stocks have climbed, some investment professionals, including Chung, still think there are opportunities to be had, though it will be increased defense-sector spending, not Twitter tirades, that drives the industry forward.