Defence Stocks Plummet amid Threats of Peace Breaking Out on Korean Peninsula

ECONOMICS, 7 May 2018

New Matilda – TRANSCEND Media Service

War. What is it good for? Well, the economy, stupid. And conversely, if the prospects of war reduce, you can pretty much guess what happens to the fortunes of major defence companies.

(IMAGE: clement127, Flickr)

30 Apr 2018 – With South Korean president Moon Jae-in leading an extraordinary diplomatic ‘assault’ on North Korean president Kim Jong-un – a strategy which led to their historic meeting last week and an agreement to work towards stability in the Korean Peninsula – there are, sadly, going to be some losers from the march towards peace.

Reports Fortune magazine,

“On Friday, while the broader stock market as measured by the S&P 500 index remained largely flat, the S&P Aerospace and Defense Select Industry Index fell roughly 1.3%.

“The US’s five largest defense contractors shed about $10.2 billion in value on Friday alone. Lockheed Martin fell 2.5% to a valuation of about $92.1 billion; Northrop Grumman slid 3.4% to $56 billion; General Dynamics shed 3.8% to $60.7 billion; Raytheon dropped 3.6% to $50.8 billion; and finally, Boeing slid a much lesser 1% to $200.2 billion.”

The news is actually a bit worse – the S&P Aerospace & Defense Index is actually down 4.3% since the start of the week, with investors generally nervous that we’re at serious risk of entering a period of relative peace.

The Korean peace deal, of course, has a way to go yet, but if progress continues, investors should take comfort in the reality that we’ll almost certainly find a new ‘threat’ to the West to buoy US stocks.

Early front-runners would be China and Russia, and scrutiny is likely to intensify on Iran. New Matilda would like to formally nominate New Zealand, in preparation for next year’s Bledisloe Cup.

In the meantime, enjoy it while it lasts.

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