Defense stocks have been a no-brainer “buy” given all the geopolitical upheaval of the past few years. Now, investors just got another 1.5 TRILLION reasons to add more – the 2027 budget outline from the Trump Administration.
Specifically, the president asked for an eye-popping $500 billion increase in the US military budget for fiscal 2027. That would pay for everything from the “Golden Dome” missile defense program to new ships for the Navy to weapons restocking to higher pay for military personnel.
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SPY, ITA, EUAD (January 2025 – Present, % Change)
Data by YCharts
The proposal is just the starting point for negotiations with Congress, of course. But it comes after a period of massive outperformance by US and foreign defense names.
As you can see in the MoneyShow Chart of the Day, the iShares US Aerospace & Defense ETF (ITA) and Select Stoxx Europe Aerospace & Defense ETF (EUAD) are up 53.7% and 75.6% since the start of 2025. The State Street SPDR S&P 500 ETF Trust (SPY) is up just 13.5% in the same timeframe.
Zoom in on the short term and it’s more of the same given the start of another Middle East conflict. Among US companies that make military vessels, fighters, bombers, missiles, bombs, and electronics, Huntington Ingalls Industries (HII) is up 16.9% year-to-date...Northrop Grumman Corp. (NOC) is up 23.5%...Lockheed Martin Corp. (LMT) is up 29.4%. Meanwhile, the British defense contractor BAE Systems Plc (BAESY) is up 30.8%.
No one wants a more dangerous world. But that’s the one we have. As an investor or trader, you always have to adapt to reality. Defense stocks were already working…and the behemoth of a budget request could give them another push.
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