Defense Stocks Climb on Trump's $1.5T Military Budget Proposal
Shares of Lockheed Martin, RTX, and L3Harris gain as investors react to a call for a dramatic increase in U.S. military spending.
Shares of major U.S. defense contractors including RTX Corp., Lockheed Martin, and L3Harris Technologies climbed in pre-market trading Thursday, extending recent gains after former President Donald Trump called for a monumental increase in the nation's military budget.
The rally gained momentum after a social media post on January 7th where Trump advocated for a $1.5 trillion defense budget for 2027 to build a "Dream Military," citing "very troubled and dangerous times." The proposal represents a significant potential increase over current spending levels, immediately fueling investor optimism for a revenue boost for the Pentagon's largest suppliers.
The market reaction was swift. Following the announcement, global defense stocks surged, with U.S. firms leading the charge. Over the past week, L3Harris Technologies (LHX) saw its stock rise by 5.5%, while Lockheed Martin (LMT) gained 2.7% and RTX Corp. (RTX) added 1.3%. The buying interest continued into Thursday's pre-market session, signaling sustained investor appetite for the sector.
The call for higher spending marks a notable turn from recent criticisms. Earlier in the week, some defense stocks had experienced volatility after Trump criticized contractor practices and suggested a ban on stock buybacks. However, the subsequent pledge to dramatically lift the military's budget appears to have overshadowed those concerns, prompting a rebound across the sector.
An expanded budget would provide a significant tailwind for an industry already benefiting from heightened geopolitical tensions and increased munitions demand related to conflicts in Ukraine and the Middle East. A larger top-line spending figure could translate directly into larger and more frequent contracts for flagship programs, from Lockheed's F-35 fighter jets to RTX's advanced missile defense systems.
However, the proposal has been met with considerable skepticism from fiscal analysts. According to Benzinga, budget experts have questioned the feasibility of such a steep increase, projecting it could add trillions to the national debt over the next decade. The proposal's journey from a campaign talking point to actual legislation is long and faces significant political and fiscal hurdles.
For now, investors are focused on the potential upside. The prospect of a historic boost to military spending has provided a powerful catalyst for the defense sector, placing it firmly on Wall Street's radar as a key area to watch in the evolving political landscape.