Shares in defense companies worldwide jumped Thursday after President Donald Trump pushed for a dramatic hike in U.S. military spending to $1.5 trillion for 2027.
The rally reversed Wednesday’s losses, when stocks dipped on Trump’s warning against dividends and buybacks unless production ramps up.
U.S. Defense Giants Lead Gains
Major American contractors bounced back strongly:
- Northrop Grumman: Up 8.3%
- Lockheed Martin: Gained 6.4%
- L3Harris Technologies: Rose 7%
- Smaller players Kratos Defense and AeroVironment: Climbed 13.8% and 11.7%
Europe Hits Record Highs
European defense firms also soared before easing slightly:
- BAE Systems (UK): +6.1%
- Leonardo (Italy), SAAB (Sweden) and Rheinmetall (Germany): Between 1.8% and 3.6%
The sector’s regional index has risen 57% in the past year, driven by ongoing conflicts and recent geopolitical events.
Budget Boost vs Dividend Concerns
The proposed near-doubling of spending from $901 billion overshadowed worries about curbs on shareholder returns. Lockheed Martin, for example, has increased dividends for 23 straight years.
Morgan Stanley analysts called any capital limits a minor drawback compared to the huge revenue potential.
Some see investors shifting toward non-U.S. firms to avoid the restrictions.
Geopolitics Fuels Investor Focus
Saxo Bank strategist Neil Wilson said: “Geopolitical risks dominate 2026 markets, putting defense and rare earths in the spotlight.”
