The year is quickly coming to a close, which means it’s time for a few annual traditions.

Each year as part of my Lifetime Income Report newsletter, I like to dedicate our final monthly issue to providing an annual investment outlook.

In these special issues, I share my thoughts on emerging trends for the year ahead, along with an income play to help my readers profit from it.

Given everything that’s going on in the world lately, it’s probably no surprise that this year’s forecast was less optimistic than usual.

But of course, there’s always an investment angle in any market.

Today I’ve decided to unlock an excerpt from my 2024 investment outlook as a thank you for being a Rich Retirement Letter subscriber.

Investment Outlook 2024

We’re nearing the end of the year, which means it's time to look ahead at the investment landscape for the year ahead.

I wish I could end the year on a more optimistic note. But I’m afraid that there are already signs we could be in for a turbulent 2024…

To start with the obvious, the violence that broke out in Israel added a lot of volatility to an already unstable global political landscape.

That’s not to mention how the conflict will almost certainly lead to more partisan gridlock back here in the U.S. too.

After all, disagreement over how much support to send Ukraine was partly responsible for stalling negotiations that nearly led to a government shutdown in September.

Congress got its act together at the last minute and passed a bill to temporarily fund the government before a shutdown last time.

But they only kicked the can down the road, pushing the problem until mid-November. Depending on when you read this, another stalemate could have caused an actual shutdown.

So to sum up where we’re at, a powder keg in the Middle East has gone off… Congress can’t seem to reach a lasting budget agreement to avoid a government shutdown….

And we’re entering a presidential election year, when volatility stemming from policy unknowns and negative campaigning will flood the market.

In times like these, it pays to have some defensive positions in your portfolio that can provide stability when volatility strikes.

So for our 2024 investment outlook, we’re doubling down on a stock from our portfolio that’s the ultimate hedge against uncertainty.

Before we get to this month’s income play though, let’s first discuss one relatively safe bet in a world full of wild cards.

Invest in a Sector Resistant to Partisan Gridlock

Government spending is a can of worms that we don’t necessarily need to open here. I certainly have thoughts on the topic, as I’m sure you do too.

But regardless of your position, two things remain true: the U.S. government has an enormous military budget, and military spending has been on the rise the for several years.

It’s unlikely that the U.S. will significantly cut spending in a time like this where two ongoing conflicts require the country’s military support. Herein lies the income opportunity…

Increased military aid means new lucrative deals for American defense contractors that supply the country and its allies with munitions.

In 2022, the U.S. sent a whopping $113 billion in aid to Ukraine alone. As I write this, politicians are drafting, negotiating, and revising similar spending plans to assist Israel.

And there’s no telling whether these conflicts could escalate into broader regional wars, requiring even more military spending. 

Looking at the current state of U.S. politics and the world more generally, increased defense spending seems like one of the surest bets you can make.

Now, I know what you might be thinking… Won’t a government shutdown put a hold on military spending? And wouldn’t this put a dent in revenue for defense contractors?

Well, yes and no. A prolonged shutdown could temporarily freeze new deals with defense companies, who get the bulk of their business from the federal government.

But large defense contractors, like the one I’ll discuss in a moment, are more insulated from these pauses than you might think.

That’s because they work on long-term contracts and typically have billions of dollars in backlogged projects to keep them busy.

In previous government shutdowns, these companies tend to underperform the broad market. But they rebound quickly and usually outperform as soon as a deal is reached.

So a government shutdown — whether it’s in 2023 or the next time Congress can’t seem to get past a gridlock — may present an opportunity to buy these stocks at a better price.