In the line of fire

摘要

Experience suggests that shares in defence companies can offer a safe haven for investors during periods of economic turbulence. During the previous two recessions, American defence shares outperformed the market. That is not surprising: more than any other industry, defence is a client of government. And governments set military budgets according to their involvement in wars and their perception of external threats-neither of which has much connection with the business cycle. But in this downturn, something different is going on. So far this year the S&P 500 index has fallen by 14%, but defence shares have fallen by 22%. The cloud hanging over the industry is the gloomy conviction that after eight years of George Bush, during which the Pentagon's budget more than doubled to $666 billion, Barack Obama is determined to change things.