A GOP sweep has led to strong gains for defense stocks in the past. This time, however, that may not be the case. Defense has historically outperformed when there's been a single party in control across Congress and the executive branch — in particular, the Republican party, according to Wells Fargo analyst Matthew Akers. The sector outperforms the S & P 500 by more than 12 percentage points under a GOP-controlled government, he noted.
"Even with a majority, R leaders would need to thread the needle between House Freedom Caucus on the right, and enough Senate Democrats on the left to filibuster budgets without an equitable non-defense funding split. Another two years of low growth for both defense and non-defense looks likely to us," Akers wrote in a Tuesday note. The likelihood of further tariffs against China under a Trump administration could also negatively impact Boeing.