When international conflicts escalate, do Lockheed Martin share prices increase in value?
Lockheed
Martin share prices tend to increase in value when international conflicts
escalate. This is because investors believe that the company will benefit from
increased demand for its products and services. For example, in the year
leading up to the Iraq War, Lockheed Martin's stock price rose by more than 50%.[1]
Here are some of the reasons
why Lockheed Martin's share prices may increase when international conflicts
escalate:
- Increased
demand for military equipment: When there is a threat of war, or when an
actual war breaks out, governments often increase their spending on
defence. This can lead to increased demand for military equipment, which
can benefit companies like Lockheed Martin.
- Increased
government contracts: Governments often award contracts to defence
contractors to develop and produce new weapons systems. When there is an
increased threat of war, or when an actual war breaks out, governments may
be more likely to award these contracts.
- Positive
investor sentiment: When there is a threat of war, or when an actual war
breaks out, investors may become more bullish on defence stocks. This is
because they believe that these companies will benefit from the increased
demand for military equipment.
There is
some evidence to suggest that Lockheed Martin's share prices have increased in
line with the escalation of international conflicts since its predecessor,
Lockheed Corporation, was founded in 1926. For example, the company's stock
price rose significantly in the early days of the Vietnam War, the Gulf War,
and the Iraq War. However, it is important to note that there are other factors
that can also affect Lockheed Martin's stock price, and it is not always the
case that the share price will increase when international conflicts escalate.
Here is a
brief look at how Lockheed Martin's share price has performed in the years
leading up to and during some major international conflicts since 1950 (as
Lockheed Corporation until 1995):
- Korean
War (1950-1953): Lockheed's share price increased by about 50% in the
years leading up to the Korean War. However, the share price then declined
by about 20% during the war.
- Vietnam
War (1955-1975): Lockheed's share price increased by about 100% in
the years leading up to the Vietnam War. The share price then continued to
rise during the war, reaching a peak in 1966. However, the share price
then declined by about 50% in the years following the war.
- Gulf
War (1990-1991): Lockheed's share price increased by about 20% in the
year leading up to the Gulf War. The share price then continued to rise
during the war, reaching a peak in 1991. However, the share price then
declined by about 10% in the years following the war.
- Iraq
War (2003-2011): Lockheed Martin's share price increased by about 50%
in the year leading up to the Iraq War. The share price then continued to
rise during the war, reaching a peak in 2008. However, the share price
then declined by about 30% in the years following the war.
- Yemen
(2015-2019): The share price of Lockheed Martin increased by about 50%
from the start of the war in 2015 to its peak in 2019. The company's stock
price has since declined somewhat, but it is still significantly higher
than it was before the war. The war has been a humanitarian disaster, with
millions of people displaced from their homes and thousands of civilians
killed. The United Nations has called the war the world's worst
humanitarian crisis. Despite the humanitarian costs of the war, it has
been a boon for the arms industry. Lockheed Martin is one of the largest
beneficiaries of the war, as it has been providing arms and military
equipment to the Saudi-led coalition.[2]
Clearly, then, there is some
evidence to suggest that the company's share price may be more likely to
increase when there is a threat of war or when an actual war breaks out. For a
more recent example, Lockheed Martin's share prices have increased since the
outbreak of hostilities between Ukraine and Russia. As of August 18, 2023, the
company's stock price is up about 18% since just before February 24, 2022, the
day Russia invaded Ukraine.[3] [4]
This chart shows how Lockheed Martin’s share
prices have increased in recent years as various global conflicts have occurred
or threatened such as in Ukraine and escalated tensions with China in the Taiwan
Strait area:
There are a few reasons why
Lockheed Martin's share prices have increased since the start of the Ukraine
war. First, the war has led to increased demand for military equipment.
Governments around the world are increasing their spending on defence, and this
is benefiting Lockheed Martin, which is a major supplier of military equipment.
Second, the war has created
uncertainty in the global economy. This has led investors to seek safe haven
investments, such as stocks in defence companies. Lockheed Martin is seen as a
safe haven investment because it is a major supplier to the U.S. government,
which is unlikely to cut back on its defence spending.
Finally, the war has boosted
investor sentiment towards defence stocks. Investors are optimistic that the
war will lead to increased demand for military equipment, which will benefit
defence companies like Lockheed Martin which is well-positioned to benefit from
the war in the short term, and its share prices are likely to remain elevated
for the foreseeable future.
Lockheed Martin (and BA
Systems: see Appendix) were considered in 2012 to be the top two companies in
the world that are profiting the most from war.[5]
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