How Might Investors Profit From Trump’s New Star Wars Space Force?

How Might Investors Profit From Trump’s New Star Wars Space Force?

For the first time since Ronald Reagan’s Strategic Defence Initiative was dubbed ‘Star Wars’, the USA has confirmed its ambitions to extend its military reach beyond planet Earth and into space. Donald Trump wants to build a sixth military service within the country’s army – a new ‘Space Force’. The president’s recent call for ‘American dominance in space’ comes with a vision that appears even more ambitious than that of his predecessor almost 4 decades ago now. But is there a way for those investing online into ISAs and SIPPs to benefit from the massive aerospace spending realising Trump’s ambitions would entail?

Building from the ground up the first new defence service of the U.S. military machine since the creation of the Air Force in 1947 could prove a major boost for the country’s private aerospace industry. However, there is the caveat that much of the technology that would be expected to be deployed would come from existing R&D partnerships and is already developed. For example, the Defence Advanced Research Projects Agency (Darpa) has been working on a reusable ‘spaceplane’ named the Phantom Express. Its minimal launchpad time requirements give it ‘aircraft-like’ deployment times to space, where its main function is the rapid deployment of small satellites. Other technology already being developed includes hypersonic missiles that can reach speeds five times the speed of sound.

Boeing is also working on the latter technology with Lockheed Martin also recently awarded a £373 million contract by Washington. The investment is a direct response to intelligence that says Russia and China are investing heavily into ‘space military’ programs, including hypersonic missile technology. That’s despite the 1967 Outer Space Treaty, which decreed all international space exploration should only be for peaceful purposes. The military move is being positioned as one that protects the Treat rather than breaks from it. Heather Wilson, the Air Force Secretary, said the new Space Force’s role is

“to be able to deter, defend and prevail against anyone who seeks to deny our ability to freely operate in space”.

Despite ongoing projects, Bank of America Merrill Lynch defence analyst Ron Epstein believes the programme is likely to provide a boost to companies such as Boeing and Lockheed, which are currently posting strong results anyway due to recent ramp up in military spending. Epstein explains:

“This is good because it breaks it out from the rest of the budget and identifies it as an item to fight for.

“If you look at the major players in the US, most of them have divisions that can participate in this. The companies can all get a piece of it, but there is not one that can do all of it. So the question is how big a chunk can you get and what technology can you bring to the party.”

Mergers are the industry moves to capitalise on the additional funding made available could be on the cards and Northrop buying rocket maker Orbital for $7.8 billion (£6.05) earlier this year is considered a front runner for a pattern expected to continue.

Credit Suisse’s aerospace analyst Robert Spingarn highlighted Northrop Grumman, Raytheon and Maxar Technologies as the companies most likely to benefit from increased spending. Those, and the likes of Boeing and Lockheed Martin will likely be making their way onto the watch lists of many investing online.

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