One sure winner under President Trump

There has been a lot of talk and anticipation about President Donald Trump’s real effect on the economy.

People are excited about a rebirth in U.S. manufacturing, new business friendly tax policies, new healthcare and more infrastructure.

But of all these, the one that seems most likely is an increase in defense spending… but it’s not what you might think.

The big new money that’s flowing isn’t from domestic military spending. It’s happening in Europe, with our NATO allies.

During the election, Trump was very vocal about his desire to have our NATO partners pay their fair share of the alliance’s costs.

In 2014, NATO members agreed to move to a 2 percent of GDP threshold for military spending, with 20 percent of that being spent on hardware. Last year, Germany spent 1.2 percent on defense.

But this year, Germany is expected to raise its spending through 2020 to the highest it has been in the past 25 years. And 19 of NATO’s 28 members have also increased military spending in the past 18 months.

Find a war

Some of this comes as Europe struggles through a severe economic slowdown that hasn’t been helped by all the central bank generosity or from individual nations.

Like it or not, defense spending usually gets an economy moving since most of the equipment is very expensive and takes a lot of workers to create.

There used to be a saying inside the Beltway: “If the economy is flagging, start a war.” That was the shorthand and cynical version of the fact that boosting military spending has a big influence on an economy.

And Trump recently said in an interview that spending on the military should take precedence over deficit spending.

Every project has a number of subcontractors, so any big firm that lands a contract then employs scores of others to do specialty work.

This may be what these countries were attempting to do before Trump took office. But now that Trump is in, this spending is looking even more likely for a number of years moving forward.

The spoils of war

This is going to be a boon for defense contractors.

And the trick here is to look to the firms that will most benefit Europeans, since they will be the ones spending the money and will want jobs to go to their constituents.

The biggest winners here are likely to be BAE Systems, Europe’s biggest defense contractor and No. 3 in the world, according to industry magazine Defense News.

The others are Airbus Group, which produces combat aircraft, aerospace equipment and helicopters, Leonardo Spa, an Italian high tech aerospace and defense contractor and Thales, a French aerospace, defense and security company.

Those three firms are in the Top 10 biggest defense firms in the world and are traded in the U.S. (because all of them have business in the U.S., too).

There are smaller firms like Rolls-Royce, Safran and Rheinmetall, which could benefit, but their fortunes are not as sure as the big players.

Made in the USA

If you’re more partial to buying American then there are some solid companies here that will also benefit from increased spending both home and abroad.

I don’t include Boeing in this list simply because less than a third of its revenue comes from defense these days, and the company doesn’t have the reputation that it did post-Vietnam.

Lockheed Martin is the No. 1 defense contractor in the world, and its stock has been beaten down by Trump’s tweets regarding the cost of the F-35 program. But that is only one project among scores of others and given Trump’s most recent pro-defense statements, there’s not much to worry about.

Northrop Grumman is No. 6 on the list and is building the new stealth bomber, which Trump hasn’t gone after yet. It’s also a cyber-security player that has a long reach but a very good market at home.

No. 4 Raytheon basically invented radar in the 1940s and has continued to build on that reputation. Not only is it one of the leading rocket and missile makers in the world, it is a leader in secure networks and cyber security.

Finally, No. 17 Harris is a secure communications specialist for defense, intel and aerospace sectors. It has done well recently but is a great long-term choice.

— GS Early

The post One sure winner under President Trump appeared first on Personal Liberty®.