The U.S. government spent some $30 billion on the defense in 2006--and that helped make stocks in the sector quite valuable to investors. As we look into 2007, the question about how defense stocks will do this year was a topic on "Morning Call" (we also viewer email submissions). The question may be even more important as the Democrats take control of Congress.
Scott Sacknoff is president of The Spade Defense Index and Wolfgang Demisch is principal and aerospace consultant with Demisch Associates. Both men agreed that the defense sector will be strong in 2007. Sacknoff says he expected the government to increase defense spending--especially with supplemental budgets to be near $170 billion by the end of the year.
Sacknoff says that Democrats in Congress will likely not decrease spending on defense--as they look to the 2008 elections. Sacknoff says they don't want to be seen as weak when it comes to homeland security.
Demisch agrees with Sacknoff that defense stocks will do well in 2007. He says that's true even if defense is a cyclical sector. A viewer email ( Sandra from Ohio) asked what stocks investors should look at considering the change from ships and tanks to high tech weapons.
Demisch answered by saying large and "traditional" defense companies like Raytheonand Lockheed are necessary to make parts for high tech weapons.