Fitch Forecasts 4-Year Increase in DoD Budget, Defense Spending After Trump Win

Credit rating agency Fitch Ratings expects the Defense Department‘s budget and overall defense spending to increase in the next four years on Donald Trump’s election as president with the cybersecurity environment and U.S. Navy as key potential beneficiaries.

Fitch said Wednesday it improved its credit view of the U.S. defense sector on top of its pre-election forecast of increases to government spending over the next five years.

Fitch added the Department of Homeland Security could also see spending increases with border security as a focus area and a potential source of new contracts for defense-oriented companies, while NASA could also receive a budget boost.

The company bases its defense outlook on expectations that current spending caps under the Budget Control Act will be removed under Trump’s administration.

Another continuing resolution could extend into January but temporary CRs will be less of a risk than in the past decade with a Republican president and GOP-controlled Congress, Fitch noted.

Divisions within the GOP, small Republican majorities in both legislative houses, Trump’s outsider status, Senate rules are factors Fitch advised investors to watch for in the progress of defense measures through Congress.

The incoming administration’s views on trade could impact overseas defense campaigns and place U.S.-based contractors at a disadvantage in terms of international sales opportunities, Fitch said.

Fitch added key defense and security developments in the next months include coordination among Republicans; appointment of a new defense secretary; and submission of the fiscal 2018 budget request.

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