Aerospace & Defense
Investors should reduce risk, increase allocation to safe havens, and brace for oil price volatility and supply disruptions stemming from the Middle East over the next zero-to-12 months.
Stronger US growth elicits a response from the House Republicans. But a government shutdown is not devastating to the economy. What is more devastating would be a crisis in the Middle East, Europe, and Asia. Stay long US defense, energy, and large caps stocks.
Countries and commercial operators are racing into space to accrue economic gain from space exploration. In coming years, the space industry will continue to grow, as humans venture into space for tourism, mining, farming, and even habitation. The industry is still in its infancy but has tremendous potential. We believe it is one of the next big investment ideas. We will monitor the theme and take on investment exposure once it matures.
The Russia-Ukraine war has prompted Europe to ramp up its defense spending. This will greatly benefit its defense industry, especially if defense coordination across the EU increases.
Go long the Kensho Space index over a cyclical horizon on the back of growing public and private investment, rising national security interests, declining sector costs, and heightened geopolitical risk.