'While the U.S./Iran fight over the past couple of weeks has sent aerospace and defense stocks flying, we would caution against jumping on this momentum trade at this point.'
Since December 27, when a rocket attack killed an American contractor in Iraq, the aerospace and defense sector has been the best performing S&P 500 industry group, according to analysts at research service Bespoke Investment Group.
Northrop Grumman NOC, -1.01%, Raytheon RTN, +0.58%, Lockheed Martin LMT, -0.90% and L3 LHX, -0.54% are each more than three standard deviations above their 50-day moving average. Historically, when aerospace and defense stocks make that big a move without doing so in the prior three months, returns are typically weak—Northrop Grumman, for example, has underperformed by 11.8 percentage points when similarly overbought, compared with its typical move. Defense stocks are also at the top of Bespoke’s overbought industrials list.
“In summation, while the U.S./Iran fight over the past couple of weeks has sent aerospace and defense stocks flying, we would caution against jumping on this momentum trade at this point because downside mean reversion usually occurs after the group gets this extended,” they advise. Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. Be sure to check the Need to Know item. The emailed version will be sent out at about 7:30 a.m. Eastern.Steve Goldstein Steve Goldstein is MarketWatch markets editor for Europe. Follow him on Twitter: @MKTWgoldstein.
South Africa Latest News, South Africa Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
Iran says missile attacks on U.S. targets were 'legitimate self-defense': TVIran's missile attacks on U.S. targets in Iraq on Wednesday were 'legi...
Read more »
U.S. Defense Secretary: We expect Iran 'will retaliate'Defense Secretary Mark Esper said Tuesday that the United States “should expect” retaliation from Iran for the drone strike that killed Iranian commander Qassem Soleimani ordered by President Trump.
Read more »
U.S. ready to finish any war started with Iran: Defense SecretaryU.S. Defense Secretary Mark Esper said on Tuesday the United States wants to de-...
Read more »
Defense stocks in Asia soar after Iran attacks on Iraqi bases hosting US troopsMilitary-related shares in Japan, South Korea and China surged on Wednesday — some by more than 20% — after Iran attacked multiple bases housing American troops in Iraq.
Read more »
US-Iran news: Iran fires missiles at US forces in Iraq - CNNIran fired more than a dozen ballistic missiles at Iraqi military bases housing US troops, in retaliation for the US killing of Iranian commander Qasem Soleimani. Follow here for the latest.
Read more »