US Defense Stocks Could Rally Into Year End

Short sellers targeted U.S. defense stocks in October, driving the iShares Dow Jones US Aerospace and Defense Index ETF (ITA) to a 10-month low. Few components have been spared in the volatile downdraft, which has also affected mega caps The Boeing Company (BA) and Lockheed Martin Corporation (LMT). A strong bounce into November has raised bottoming calls, but new lows are possible in the coming weeks. Even so, the sell-off will likely yield a major buying opportunity ahead of new highs. It's hard to envision these issues entering bear markets in a presidential administration committed to confrontation and higher defense spending.