Magazine article Insight on the News

Military Spending Is to Markets' Liking. (the Business)

Magazine article Insight on the News

Military Spending Is to Markets' Liking. (the Business)

Article excerpt

And so Baghdad falls to coalition forces and the markets celebrate, continuing their rally since the war began, give or take a couple of sessions when Iraq worries had traders and investors backtracking nervously. So will the good times now roll?

Market traders appear to think so. They say that the March skip, which saw Standard & Poor's 500 Index rebound 10 percent from a five-month low reached at the start of the month, points the way forward.

Optimists argue that the economy will get a tremendous lift as military spending ramps up--defense spending will hit almost $450 billion in fiscal year 2003, up from $350 billion the previous year. That, they say, should put paid to any talk of a double-dip recession, especially when you add in lower oil prices as a result of the United States safeguarding Iraqi oil fields.

Plus they point to the absence of inflation which, aside from food and energy, is running at only 1.5 percent. According to the bullish James Paulsen, chief investment officer of Wells Capital Management, extra defense and homeland-security spending combined with tax cuts could sharply boost growth later this year. …

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