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Citi Calls Aerospace, Defense Stocks "Close To Major Tactical Bottom" After Brutal Selloff
US aerospace and defense stocks have been tracking lower as Polymarket odds assign Democrats a higher chance of taking the Senate.
The chart below shows the S&P 500 Aerospace & Defense index approaching bear-market territory, down roughly 20% from its summer high, as Polymarket's implied probability of Democratic Senate control topped 64%.
A nearly 20% slide in aerospace and defense stocks is drawing interest from trading desks looking to buy the dip, though stepping in now risks catching a proverbial falling knife.
Citi aerospace and defense analyst John Godyn sees an opportunity to begin adding exposure. In a note Wednesday, his team outlined that many of these stocks are "close enough to a major tactical bottom."
"Both aerospace and defense have simultaneously experienced major pullbacks and, while 3Q26 is set up to be a volatile EPS season, we think that we are close enough to a major tactical bottom in many stocks to again advocate for buying the dip selectively: Opening Positive Catalyst Watch on RTX," Godyn said.
The market's big disconnect is that Polymarket odds are weighing on these names, as fears of a Democratic sweep in the midterms early next month could cloud the outlook for military spending. But as Godyn pointed out, all of this uncertainty is happening while the proposed military spending pipeline keeps expanding.
The analyst continued, "Within defense, prefer SMID-cap defense stocks aligned with the highest growth multi-year megatrends through 3Q26 earnings: Opening Positive Catalyst Watch on HII today and revisiting others post AUSA."
"As usual, we conducted a supplier survey (sample size of 100) to validate company commentary and build conviction: Our top OE-levered pick remains HWM, where we have a pre-existing Positive Catalyst Watch," he added.
Godyn shows that aerospace and defense stocks in his coverage universe have taken a beating:
He notes that market positioning is more positive in aerospace names than in defense names.
For defense stocks, Godyn says the "outlook is strong," but the funding debate still rages on.
Professional subscribers can read more on aerospace and defense here at our new Marketdesk.ai portal.
Tyler Durden Thu, 10/08/2026 - 14:40
Continue reading...
[ H/T ZeroHedge ]
US aerospace and defense stocks have been tracking lower as Polymarket odds assign Democrats a higher chance of taking the Senate.
The chart below shows the S&P 500 Aerospace & Defense index approaching bear-market territory, down roughly 20% from its summer high, as Polymarket's implied probability of Democratic Senate control topped 64%.
A nearly 20% slide in aerospace and defense stocks is drawing interest from trading desks looking to buy the dip, though stepping in now risks catching a proverbial falling knife.
Citi aerospace and defense analyst John Godyn sees an opportunity to begin adding exposure. In a note Wednesday, his team outlined that many of these stocks are "close enough to a major tactical bottom."
"Both aerospace and defense have simultaneously experienced major pullbacks and, while 3Q26 is set up to be a volatile EPS season, we think that we are close enough to a major tactical bottom in many stocks to again advocate for buying the dip selectively: Opening Positive Catalyst Watch on RTX," Godyn said.
The market's big disconnect is that Polymarket odds are weighing on these names, as fears of a Democratic sweep in the midterms early next month could cloud the outlook for military spending. But as Godyn pointed out, all of this uncertainty is happening while the proposed military spending pipeline keeps expanding.
The analyst continued, "Within defense, prefer SMID-cap defense stocks aligned with the highest growth multi-year megatrends through 3Q26 earnings: Opening Positive Catalyst Watch on HII today and revisiting others post AUSA."
"As usual, we conducted a supplier survey (sample size of 100) to validate company commentary and build conviction: Our top OE-levered pick remains HWM, where we have a pre-existing Positive Catalyst Watch," he added.
Godyn shows that aerospace and defense stocks in his coverage universe have taken a beating:
He notes that market positioning is more positive in aerospace names than in defense names.
For defense stocks, Godyn says the "outlook is strong," but the funding debate still rages on.
Professional subscribers can read more on aerospace and defense here at our new Marketdesk.ai portal.
Tyler Durden Thu, 10/08/2026 - 14:40
Continue reading...
[ H/T ZeroHedge ]
