To say that 2016 got off to a rocky start would be a major understatement. In the middle of January, the Dow plunged 391 points on fears of a Chinese slowdown and cheap oil. For some, this would sound like welcome news: bring jobs back to the US as China suffers and fill up your car for less. But, in the hyper-connected world economy we find ourselves in, slowdowns and shutters in the world’s second largest economy (in terms of GDP).
$583 Billion Defense Budget
But where there’s war, there’s profits. Major defense contractors were rewarded with a rosy outlook from the Pentagon when Secretary of Defense Ashton Carter delivered the Fiscal Year 2017 US Defense Budget. With a strong focus on outpacing Russian and Chinese investments in state-of-the-art weapon systems, the Defense Department is ordering 43 of Lockheed Martin’s F-35 fighters (down from an original order of 48). However, D.O.D. is upping their order for 13 new Join Strike Fighters to the Navy and Marine Corps.
This is excellent news for defense contractors that have managed to get their foot in the door on some very lucrative military contracts. The winners of this year’s budget include: Lockheed Martin Corporation (N:LMT), Austal USA (AX:ASB), Elbit Systems Ltd. (O:ESLT), and Honeywell International (N:HON).
Business Services Sector Beats Market
As the broader market entered into 2016 with a sputtering 2.4% growth in GDP, business service indexes have been calculated at an uptick of 4.1% year over year. This is exciting news when combined with approximately 74.6% of stocks in the business services market reportedly beating their forecasted earnings.
According to SystemID.com, an increasing evolution in the way businesses operate is spurring renewed investment in the systems used to track inventory and manage logistical concerns. Technology is advancing so quickly and big data is becoming so big, that companies are hungry for new systems and strategies to keep up. Many of these new strategies involve investments in business technology and IT infrastructure.
Technology Continues to Power the Future
Outside of the defense and business services market, the broader technology market is continuing to hum along. While some of the major players may have stubbed their toe with earnings reports that are falling short of rosy forecasts (cough, cough, Apple (O:AAPL) and Amazon (O:AMZN)), there are some bright spots in the tech sector that are worth paying attention to.
As demand for bandwidth grows, companies like Infinera Corp (O:INFN) are looking extra juicy and ripe for the picking. These medium-sized tech companies that support the expansion and conversion of dark fiber to support growing bandwidth needs in the US are both ripe for increased earnings (as Infinera has been reporting), and may be headed towards acquisition by some of the larger players in the market.
While the news may not have been a big, exciting start for 2016, there are plenty of bright spots where you can stash some extra money and enjoy added income in retirement!