Mike Larson | Editor-in-Chief
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.
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.
Ken Medlock is senior director of the Center for Energy Studies at Rice University’s Baker Institute for Public Policy. He breaks down the Middle East conflict’s impact on global energy in this MoneyShow MoneyMasters Podcast episode.
A key point: Despite the US being a net exporter, disruptions in the Strait of Hormuz are hitting over half of global oil flows, exposing how fragile supply really is. Ken pushes back on “demand destruction” narratives, pointing out consumption kept growing even with $100+ oil in the 2010s. But he also highlights the current supply gap of 7 to 8 million barrels per day that strategic reserves can only temporarily offset.
The conversation also connects energy to the AI boom, with data centers turning to natural gas and nuclear to bypass grid limits. Plus, Medlock discusses his view that any serious decarbonized future still depends on nuclear, with geothermal emerging as the next piece to watch.
The criteria to issue our Seasonal MACD Sell signal for the Dow Jones Industrial Average and S&P 500 Index (^SPX) is a new sell signal after the first trading day of April. Both DJIA and S&P 500 have to agree, notes Jeff Hirsch, editor-in-chief of The Stock Trader’s Almanac.
Volatility continues to be elevated both in terms of realized and implied. The CBOE Volatility Index (^VIX) and the equity-only put-call ratios began to rise well in advance of the current market decline, and they are still advancing, explains Lawrence McMillan, editor of Option Strategist.
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