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    Home - Finance & Investment - Defense Stocks Surge on Trillion-Dollar Budget Talk | The Motley Fool
    Finance & Investment

    Defense Stocks Surge on Trillion-Dollar Budget Talk | The Motley Fool

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    Defense Stocks Surge on Trillion-Dollar Budget Talk | The Motley Fool
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    The White House is signaling a big boost in defense spending as part of the fiscal 2026 federal budget, and investors are sending defense stocks soaring higher as a result.

    Shares of defense contractors including Lockheed Martin (LMT 3.80%), RTX (RTX 3.93%), Huntington Ingalls Industries (HII 4.16%), General Dynamics (GD 4.52%), and AeroVironment (AVAV 4.34%) are all up 5% or more as of 10:30 a.m. ET, while shares of Science Applications International (SAIC 2.00%) are up 3%.

    Clearing away the uncertainty

    Defense investors have been in a holding pattern of late. While few government observers expected a dramatic pullback in spending, a focus on efficiency and talk of investment in tech instead of new hardware has left investors on edge.

    President Donald Trump cleared some of that uncertainty on Monday night, saying the government has “essentially approved a budget” that would allocate about $1 trillion to defense. Defense Secretary Pete Hegseth followed up on the X social media platform, confirming the $1 trillion figure.

    By comparison, the 2025 defense spending is projected at about $951 billion. Neither figure includes supplemental funding added by Congress or funding for nuclear programs that is allocated under the Department of Energy budget.

    We don’t yet have details on where exactly the money will be allocated, but the comments would seem to suggest that the defense hawks inside the administration — those who want to see greater defense spending — have won the internal debate against those looking to reduce government outlays.

    Are defense stocks a buy?

    It had always seemed unlikely that defense spending would be dramatically cut, but Tuesday’s defense stock rally can be interpreted as investor relief that the worst-case scenario is seemingly off the table. With geopolitical tensions on the rise globally, there is likely to be significant demand for defense products for years to come.

    For long-term investors, defense stocks can offer an attractive mix of income via dividends and modest but reliable growth. But investors need to realize these are long-cycle industries, and that funding awarded today will take years to hit the companies’ bottom lines.

    Lou Whiteman has positions in General Dynamics and Lockheed Martin. The Motley Fool has positions in and recommends AeroVironment. The Motley Fool recommends Lockheed Martin and RTX. The Motley Fool has a disclosure policy.

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