Defense Stocks Skyrocket Following Trump’s $1.5 Trillion Military Budget Proposal
Global defense stocks experienced a significant rally on January 8, 2026. This surge followed President Donald Trump’s announcement of a proposed $1.5 trillion military budget for fiscal year 2027. This proposal represents a substantial $500 billion increase from the current $901 billion baseline. Trump’s aim is to construct what he termed a “Dream Military” to ensure America remains “safe and secure”.
Major U.S. defense contractors saw a strong rebound after initial volatility. L3Harris Technologies and Huntington Ingalls Industries each saw gains of 11% over the first five trading days of 2026. Meanwhile, Northrop Grumman and Lockheed Martin experienced rises of approximately 4-8%. Drone manufacturer AeroVironment saw a surge of over 40%. European defense stocks also experienced a rally, with the following gains:
- BAE Systems: 5.5%
- Leonardo (Italy): 1.5-2.7%
- Rheinmetall (Germany): 1.5-2.7%
The rally occurred in spite of Trump’s executive order issued on Wednesday. This order threatens to block dividends and stock buybacks for defense contractors that do not sufficiently invest in production capacity and equipment. This move specifically targeted RTX, with Trump warning that the company must “step up” investments or risk losing government contracts. Analysts have noted that while congressional approval is required for such a budget increase, the current geopolitical tensions and recent Venezuela operation support the defense sector’s momentum.
Source: CNBC