Stock markets rallied Tuesday as a ceasefire between Israel and Iran appeared to be holding, just a couple of days after conflict seemed set to expand after a U.S. attack on an Iranian uranium enrichment site. In a social media post Tuesday morning, President Donald Trump said that "ISRAEL is not going to attack Iran. All planes will turn around and head home, while doing a friendly 'Plane Wave' to Iran. Nobody will be hurt, the Ceasefire is in effect!"
However, Lockheed Martin (LMT -2.60%) stock was falling as the rest of the market soared. At 3 p.m. ET, Lockheed stock was down 3%.
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Investors predict falling demand
Lockheed Martin makes weapons systems, both offensive and defensive. Demand rises in times of conflict and falls in more peaceful times. Two weeks ago, when the Israel-Iran conflict spiked with an attack on Iranian nuclear sites, Lockheed stock took off as investors bet on heightened demand for fighter jets and missile systems.
Two weeks later, as future demand for such military products comes into question, Lockheed Martin stock is giving back most of its gains, and, indeed, trading right about back where it was before recent events.
Is Lockheed Martin stock no longer a buy?
All this is logical, but also probably a wrong reaction to the ceasefire news. Granted, active conflict increases demand for weapons systems, in particular consumable weapons systems such as missiles, which, once fired, must be replaced. The theory is that the longer the conflict lasts, the greater the demand.
But, the current ceasefire notwithstanding, there will always be a need for the products Lockheed sells.
