{"text":[[{"start":0,"text":"US defence stocks have been dragged down by growing expectations of a Democratic sweep in the upcoming midterm elections, as investors bet that the Trump administration’s plans for a $500bn boost to military spending will be scrapped."}],[{"start":25.72,"text":"The industry-standard iShares US Aerospace and Defence ETF fell 16 per cent between the beginning of July and mid-October, compared with a 3.5 per cent rise in the US benchmark S&P 500 index."}],[{"start":39.2,"text":"Over the same period, expectations that Democrats will retake both chambers of Congress in November rose 20 per cent, according to prediction-market platform Kalshi."}],[{"start":48.641,"text":"“[US President Donald] Trump’s political fortunes and the chance of the Republicans losing the Senate have almost been in lockstep with the performance of defence stocks,” said Robert Stallard, a defence analyst at Vertical Research Partners. “Usually, defence is a bipartisan issue, but this administration has made defence partisan.”"}],[{"start":68,"text":"Democrats are widely expected to win a majority in the House of Representatives in the midterms but face an uphill battle to take back control of the Senate, where 35 seats of the 100-member upper chamber of Congress are up for grabs."}],[{"start":null,"text":"
"}],[{"start":80.36,"text":"There was widespread excitement among defence investors and executives in January when Trump proposed increasing annual defence spending from $1tn to $1.5tn to build a “dream military”."}],[{"start":92.66,"text":"But relations between defence secretary Pete Hegseth and Congress have soured over the Iran war, while Democrats have vowed to reverse deep cuts to domestic programmes."}],[{"start":102.88,"text":"Concerns over inflation and rising Treasury yields have also cast doubt on bipartisan support for higher military spending."}],[{"start":110.753,"text":"Shares in US defence companies have underperformed this year, despite a surge in global defence spending and unresolved conflicts in Ukraine and the Middle East that have fed a boom in demand for American missile systems."}],[{"start":null,"text":""}],[{"start":123.04,"text":"With leading defence contractors already struggling to work through years’ worth of production backlogs, the rush by the US and allies to replenish and expand munitions stockpiles since the war began has not translated into greater investor enthusiasm."}],[{"start":135.36,"text":"Lockheed Martin, the prime contractor for the in-demand Patriot missile defence system, is down more than 20 per cent from its early March peak, while fellow leading defence companies Northrop Grumman and L3Harris are down 35 per cent and 36 per cent, respectively, over the same period."}],[{"start":152.24,"text":"Byron Callan, managing partner of research firm Capital Alpha Partners in Washington, noted that several defence executives had expressed optimism at the start of the year that the Republicans would deliver on Trump’s proposed extra $500bn in defence spending."}],[{"start":167.2,"text":"But Democrats are unhappy with how some of the defence funding has been pushed through Congress. Hegseth has further incensed lawmakers with his refusal to provide detailed accounting of the costs of the Iran conflict."}],[{"start":179.42,"text":"While there is bipartisan support for increasing production of depleted missile stockpiles, Callan said lawmakers were likely to question the order sizes of big-ticket items such as F-35 fighter jets and Sentinel intercontinental ballistic missiles."}],[{"start":193.28,"text":"“I don’t hear any Democrat calling for steep cuts in defence spending, but defence can’t be viewed in isolation,” he added. “Democrats are going to be wanting to increase non-defence spending, and so defence is likely to be subsumed into those discussions.”"}],[{"start":207.76,"text":"But Randy Gwirtzman, a portfolio manager at Baron Capital, said he thought investors were placing too much emphasis on midterm results, noting that small-cap defence stocks had been hit even harder than leading “primes”."}],[{"start":219.66,"text":"He said there was a “misconception” that “if the Democrats win the midterms, defence is going to be destroyed. I really don’t think that’s the case.”"}],[{"start":229.72,"text":"Stallard of Vertical Research Partners said high-profile projects personally associated with Trump, many of which are regarded by defence experts as eccentric or unfeasible, could be in jeopardy. They include a “Golden Fleet” of “Trump-class” battleships and a network of space-based weapons branded the “Golden Dome”."}],[{"start":246.12,"text":"“Anything that has Trump’s name on it or the word ‘golden’ could be at risk,” Stallard said."}],[{"start":250,"text":"Several leading US defence stocks staged a recovery this week, as investors anticipate reports of healthy third-quarter earnings next week. Shares in aerospace and defence companies have also benefited from the redeployment of funds away from the tech sector amid fears of overspending on AI infrastructure."}],[{"start":269.32,"text":"Analysts argue that whatever the outcome of the US budget process, geopolitical turmoil will continue to power demand for American weapons. According to investment bank Cantor Fitzgerald, the shares of established defence companies stand to benefit “as enduring conflicts degrade US deterrence to the point of raising the probability of greater global conflict”."}],[{"start":290.4,"text":"Additional reporting by George Steer in New York"}],[{"start":295.28,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1792455768_5119.mp3"}