Guns or butter? The choice between arms and social programmes is less stark than it used to be but the US defence budget still has to compete against other spending priorities for federal cash. The balance can only swing so far out of kilter before stories of $400 screwdrivers prompt a backlash. Even with the distorting effect of conflicts, the tendency since the second world war has been for US defence spending to grow for up to nine years then to stagnate or decline for a similar period.

The defence sector is now enjoying the ninth consecutive year of spending rises. The US defence budget, at $570bn in 2007, is larger than the military spending of the rest of the world put together. Yet investors are unfazed by the example of the past: shares are up more than 25 per cent this year.