If you own defense stocks, you need to watch this video.
On a recent conference call with institutional investors, a listener asked Defense Policy Lt. Gen Emo Gardner this question, “What is the impact on Pentagon spending if Congress does not have a budget by October 1st.” His response?
“The quick bottom line is it’s bad news for the Pentagon and it’s also bad news for the Defense industry. The reason is you’re continuing to spend at the rate from fiscal 2017. And under a continuing resolution you’re not allowed to do any new starts.”
With uncertainty about future spending, there would be pressure on the Defense industry to reduce spending “right away,” Gardner says. “You’re going to see outlays decrease and outlays are key to company revenues.”
The debate is heating up. And it’s not going to be pretty either. Check out the latest from Macro Policy analyst JT Taylor on why the debt ceiling debate will be a “battle royale.”