Government

Companies with significant government exposure provide goods, services, and solutions to governmental bodies, ranging from defense systems to IT services. These businesses are characterized by long sales cycles, large contract values, and high regulatory oversight. Their revenue streams are tied to government budgets, offering stability compared to commercial markets.

The performance of companies reliant on government contracts is influenced by government spending and budgets, which are directly impacted by geopolitical tensions. Political cycles and policy changes can alter government priorities and spending patterns. Technological developments, especially in defense, cybersecurity, and IT, are crucial for securing contracts. Regulatory changes and compliance affect operational costs, and geopolitical events boost demand for defense and aerospace products.

Companies with government exposure are in Aerospace & Defense, such as Lockheed Martin, Boeing, Northrop Grumman, RTX, and General Dynamics. Government IT Services include Leidos Holdings and Booz Allen Hamilton. Infrastructure & Engineering firms work on public projects, and Healthcare Services companies serve government programs.

The Aerospace & Defense sector has seen strong demand, but production lags and supply chain issues have limited output. The Government IT Services sector has shown resilience due to modernization initiatives. The outlook remains positive due to geopolitical tensions and demand for digital transformation. Challenges like supply chain constraints and inflationary pressures persist, requiring companies to focus on efficiency and strategic investments. Fiscal policy will continue to be a crucial determinant of performance.

Investing in companies with government exposure offers stable revenue streams but is subject to political risks, budget uncertainties, and contract competition. Performance is tied to government budget cycles and geopolitical events. Many defense contractors offer consistent dividends, and valuations are influenced by contract backlogs. These companies can diversify a portfolio and provide stability during economic uncertainty.