If you’ve been reading my work closely — and I know many of you have — you already know we’ve been talking about the rising probability of a defense spending resurgence as a major market theme.
Well… today that theme turned into real price action.
Across the market, defense stocks are ripping higher after President Trump’s latest public push for a much larger U.S. defense budget — talking about a $1.5 trillion military budget by 2027, a level substantially higher than what had been priced into the market.
That kind of funding trajectory gets investors’ attention for a reason: it means more government dollars flowing directly into defense contractors’ top and bottom lines.
And the market didn’t wait to react.
The iShares Dow Jones US Aerospace & Defense ETF (ITA) is up 1.5% to the best level ever and the REX Drone ETF (DRNZ) is surging 4.4%.
Here’s What We Saw Today
Major defense names are sharply higher. Stocks like Lockheed Martin (LMT), L3Harris Technologies (LHX), Northrop Grumman (NOC), General Dynamics (GDE), and a host of others all moved up strongly on the day as investors repositioned into the sector.
On Wall Street, defense firms led the market on a day when many other sectors were flat or drifting — a clear sign that money is rotating where it sees spending growth.
Even overseas, European defense stocks hit all-time highs as global demand and geopolitical tensions continue to drive allocations into aerospace & defense names.
Last month in my 2026 Outlook – there was an entire section on The Rearmament of Europe – in which I listed several stocks to play this trend.
Five of the six stocks I shared for free are hitting new highs this week.
Now, let’s be clear — this isn’t just some “noise headline.” What we’re watching unfold is a fundamental reassessment of defense equities driven by the prospect of materially larger government spending and strategic priorities, not just short-lived ETF flows.
That’s why I’ve been flagging this theme for weeks: defense isn’t a sleepy sector anymore — it’s one of the few areas where policy and real dollars are colliding with market opportunity.
Performance You Can See
And the proof is in the portfolio:
One of the defense-oriented positions we added in our newly released Select Portfolio 2026 is already up 23% as the European rearmament themes begins to go mainstream.
That’s not hindsight talking — that’s execution — and it’s exactly the kind of real market validation we look for when we build high-conviction portfolios.
What’s Driving This Movement
Government spending expectations are rising — fast. A jump toward a $1.5 trillion defense budget has the market repricing earnings forecasts across the defense complex.
Geopolitical tensions aren’t slowing down. Conflict drivers around the world — from Europe to the Middle East to Venezuela — continue to push sovereigns and strategic allies toward bigger defense outlays.
Investors are rethinking sector leadership.
After years of chasing tech and AI narratives, some of the most powerful catalysts in the market today are policy-driven cash flows — not just earnings beats.
This isn’t a fad.
This is reallocation — and we’re seeing it happen in real time.
Quick Look Ahead — January 13th
We’re going LIVE on January 13th to walk through:
📌 what this defense spending narrative means for markets in 2026
📌 how it affects the Select Portfolio 2026
📌 the two new stocks we’re adding that are poised to benefit most from these trends
But make no mistake — today’s breakout is already underway, and the smart money is moving first.
Bottom Line
The macro is aligning with our research — policy, geopolitics, and real government spending expectations are now driving defense equities toward breakout territory.
If you’ve been with us on this theme, you’re seeing the payoff start to materialize.
Talk soon,
Matt McCall
Founder, NXT Wave Research
