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Defense Giant Hits All-Time High Amid Israel-Iran Conflict
Stocks opened lower on Tuesday morning amid rising tensions in the Middle East, pushing the major US indexes off their recent highs.
President Trump called for an evacuation of Iran’s capital city, sending shockwaves in Tehran as a mass exodus appeared underway. Israel has been conducting air strikes since late last week, and the Israeli military stated that it has total control over the skies of Tehran.
Israel’s Prime Minister Benjamin Netanyahu vowed that the operation against Iran’s nuclear and military facilities would continue “for as many days as it takes.” Despite yesterday’s reports of a potential de-escalation, hostilities appear ongoing for the time being.
These types of foreign conflicts are always tragic. We certainly don’t want to minimize them in any way, shape or form. But from an investment perspective, it’s important to keep in mind that markets have a way of moving past geopolitical events fairly quickly.
The latest developments in the Middle East understandably have many investors on edge. As strategists, we face the grim task of separating the human toll from the economic and financial toll, which is never easy when lives are lost in times of geopolitical conflict.
Putting Recent Events into Perspective
How have markets responded to significant geopolitical and historical events in the past?
We looked back at nearly 40 such events dating back to World War II. On average, three months following the onset of the event, stocks were slightly higher. Below we can see an excerpt of this study covering events over the last twelve years:
Image Source: Zacks Investment Research
Generally speaking, these events can spark heightened volatility in the near-term, but stocks tend to bounce back fairly quickly. As serious as this escalation and the prospect of war are, prior instances have shown us that developments may not have much of an impact on U.S. economic fundamentals or corporate profits.
Note that the larger negative figures also coincided with bear markets, such as the March 2020 COVID-19 plunge or the inflation-induced bear market of 2022.
Of course, we cannot dismiss the risk that the latest conflict may escalate further. But the stock market’s track record of recovering quickly from these events can at the very least provide a sense of reassurance to investors.
We need to keep the big picture in mind and remember that the primary secular trend is bullish and remains intact. We do not want to allow excessive fear of a pullback or deeper correction to harm our longer-term returns.
Defense Giant Soars to All-Time High
RTX Corporation, a leading aerospace and defense company, has seen its stock hit fresh all-time highs amid the Israel-Iran conflict. Shares are widely outperforming the market this year, up better than 28% at the time of this writing.
Image Source: Zacks Investment Research
Formerly Raytheon Technologies, RTX (RTX - Free Report) specializes in avionics and mission systems. The company designs and manufactures the world’s most advanced aircraft engines and auxiliary power systems. RTX also provides advanced capabilities in air and missile defense, smart weapons, sensors and radars, and cybersecurity tools.
The defense juggernaut is part of the Zacks Aerospace – Defense industry group, which currently ranks in the top 28% out of approximately 250 industry groups. Investors should make a habit of targeting companies contained within leading industries, as research has shown that these stocks have a greater chance of producing outperformance.
RTX boasts a stellar track record of exceeding earnings estimates and has delivered a trailing four-quarter average earnings beat of 9.9%. Consistently beating earnings estimates is a recipe for success. Analysts covering RTX are expecting earnings to increase 4.2% in 2025 on $84.1 billion in revenues.
The company continues to receive ample orders from the Pentagon and foreign allies. An impressive backlog of $92 billion at the end of Q1 points to solid revenue growth prospects for its defense business, boosting its bottom line over the long-term.
Bottom Line
It’s never easy dealing with uncertainty. There’s always volatility along the way, even in the strongest bull markets.
It’s also important to not get stuck on a story (like a geopolitical event). We can’t allow fear of a deeper correction to harm our long-term returns. The way we do that is by using the data in hand to make the best decision, maintaining maximum flexibility and remaining unbiased in our approach.
Defense stocks are a good way to smooth out any volatility related to foreign conflicts. Keep an eye on RTX as the stock breaks out to all-time highs.
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Defense Giant Hits All-Time High Amid Israel-Iran Conflict
Stocks opened lower on Tuesday morning amid rising tensions in the Middle East, pushing the major US indexes off their recent highs.
President Trump called for an evacuation of Iran’s capital city, sending shockwaves in Tehran as a mass exodus appeared underway. Israel has been conducting air strikes since late last week, and the Israeli military stated that it has total control over the skies of Tehran.
Israel’s Prime Minister Benjamin Netanyahu vowed that the operation against Iran’s nuclear and military facilities would continue “for as many days as it takes.” Despite yesterday’s reports of a potential de-escalation, hostilities appear ongoing for the time being.
These types of foreign conflicts are always tragic. We certainly don’t want to minimize them in any way, shape or form. But from an investment perspective, it’s important to keep in mind that markets have a way of moving past geopolitical events fairly quickly.
The latest developments in the Middle East understandably have many investors on edge. As strategists, we face the grim task of separating the human toll from the economic and financial toll, which is never easy when lives are lost in times of geopolitical conflict.
Putting Recent Events into Perspective
How have markets responded to significant geopolitical and historical events in the past?
We looked back at nearly 40 such events dating back to World War II. On average, three months following the onset of the event, stocks were slightly higher. Below we can see an excerpt of this study covering events over the last twelve years:
Image Source: Zacks Investment Research
Generally speaking, these events can spark heightened volatility in the near-term, but stocks tend to bounce back fairly quickly. As serious as this escalation and the prospect of war are, prior instances have shown us that developments may not have much of an impact on U.S. economic fundamentals or corporate profits.
Note that the larger negative figures also coincided with bear markets, such as the March 2020 COVID-19 plunge or the inflation-induced bear market of 2022.
Of course, we cannot dismiss the risk that the latest conflict may escalate further. But the stock market’s track record of recovering quickly from these events can at the very least provide a sense of reassurance to investors.
We need to keep the big picture in mind and remember that the primary secular trend is bullish and remains intact. We do not want to allow excessive fear of a pullback or deeper correction to harm our longer-term returns.
Defense Giant Soars to All-Time High
RTX Corporation, a leading aerospace and defense company, has seen its stock hit fresh all-time highs amid the Israel-Iran conflict. Shares are widely outperforming the market this year, up better than 28% at the time of this writing.
Image Source: Zacks Investment Research
Formerly Raytheon Technologies, RTX (RTX - Free Report) specializes in avionics and mission systems. The company designs and manufactures the world’s most advanced aircraft engines and auxiliary power systems. RTX also provides advanced capabilities in air and missile defense, smart weapons, sensors and radars, and cybersecurity tools.
The defense juggernaut is part of the Zacks Aerospace – Defense industry group, which currently ranks in the top 28% out of approximately 250 industry groups. Investors should make a habit of targeting companies contained within leading industries, as research has shown that these stocks have a greater chance of producing outperformance.
RTX boasts a stellar track record of exceeding earnings estimates and has delivered a trailing four-quarter average earnings beat of 9.9%. Consistently beating earnings estimates is a recipe for success. Analysts covering RTX are expecting earnings to increase 4.2% in 2025 on $84.1 billion in revenues.
The company continues to receive ample orders from the Pentagon and foreign allies. An impressive backlog of $92 billion at the end of Q1 points to solid revenue growth prospects for its defense business, boosting its bottom line over the long-term.
Bottom Line
It’s never easy dealing with uncertainty. There’s always volatility along the way, even in the strongest bull markets.
It’s also important to not get stuck on a story (like a geopolitical event). We can’t allow fear of a deeper correction to harm our long-term returns. The way we do that is by using the data in hand to make the best decision, maintaining maximum flexibility and remaining unbiased in our approach.
Defense stocks are a good way to smooth out any volatility related to foreign conflicts. Keep an eye on RTX as the stock breaks out to all-time highs.