The Pentagon Faces Deep Spending Cuts
Author: Greg Valliere
February 20, 2025
THIS WILL BE REMEMBERED AS THE WEEK when U.S. defense policy was radically altered. Domestic spending cuts and layoffs were expected, but on Capitol Hill yesterday there was dismay over huge proposed defense cuts — combined with an apparent rejection of U.S. allies like Volodymyr Zelenskyy.
PRESS REPORTS IN THE WASHINGTON POST and elsewhere were stunning: Defense Secretary Pete Hegseth has been instructed to cut 8 percent from the defense budget in each of the next five years.
THIS PRODUCED A FIRESTORM IN CONGRESS, which will attempt to reduce the cuts, but the best case scenario for the defense industry will be relatively flat spending for the next few years, after decades of huge annual spending hikes.
IN ADDITION TO PUTTING PRESSURE on many defense firms, this will infuriate members of Congress, who know that jobs in their home districts will be jeopardized. The prospect of deep spending cuts has been supported by members of Congress — as long as the cuts don’t eliminate jobs in their home districts.
SOME PROGRAMS WILL WIN EXEMPTIONS, especially funding for border security and money for the “Iron Dome” missile defense system. And there won’t be deep cuts for modernization of nuclear weapons and missile defense, and acquisition of submarines, one-way attack drones and other munitions.
AS WE WROTE YESTERDAY, this is an unprecedented reversal of U.S. defense policy, especially the Trump Administration’s barrage against Zelenskyy.
THE WINNER, QUITE CLEARLY, is Vladimir Putin, who has won enormous concessions from the U.S. even before serious negotiations begin. Will this radical change win congressional enactment? All eyes are on the polls, which show support slipping for both Trump and Elon Musk.
The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.
AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), AGF Investments LLC (AGFUS) and AGF International Advisors Company Limited (AGFIA). AGFA and AGFUS are registered advisors in the U.S. AGFI is a registered as a portfolio manager across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.
About AGF Management Limited
Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. Our companies deliver excellence in investing in the public and private markets through three business lines: AGF Investments, AGF Capital Partners and AGF Private Wealth.
AGF brings a disciplined approach, focused on incorporating sound, responsible and sustainable corporate practices. The firm’s collective investment expertise, driven by its fundamental, quantitative and private investing capabilities, extends globally to a wide range of clients, from financial advisors and their clients to high-net worth and institutional investors including pension plans, corporate plans, sovereign wealth funds, endowments and foundations.
Headquartered in Toronto, Canada, AGF has investment operations and client servicing teams on the ground in North America and Europe. AGF serves more than 800,000 investors. AGF trades on the Toronto Stock Exchange under the symbol AGF.B.
For further information, please visit AGF.com.
©2025 AGF Management Limited. All rights reserved.
