Defense stocks soared as President Trump called for increased defense spending, saying the military budget for 2027 should be $1.5 trillion dollars. The major defense stock Lockheed Martin Corporation (LMT) posted a gain of 4.34% to close at $518.44 yesterday, 8 January 2026. Northrop Grumman Corporation (NOC) rose 2.39% to close at $590.79. RTX Corporation (RTX) ended the session 0.78% up at $187.17.
“After the long and difficult negotiations with Senators, Congressmen, Secretaries, and other Political Representatives, I have determined that, for the Good of our Country, especially in these very troubled and dangerous times, our Military Budget for the year 2027 should not be $1 Trillion Dollars, rather $1.5 Trillion Dollars, This will allow us to build the “Dream Military” that we have long been entitled to and, more importantly, that will keep us SAFE and SECURE, regardless of foe.” Trump wrote on Truth Social on January 7, 2026.
Moreover, President Trump credited his tariff policies for generating extra income to envision a 1.5 trillion defense budget for 2027. The proposed 50% rise in the budget gave an enormous boost to defense-related stocks.
Lockheed Martin (LMT) is anticipated to be the major beneficiary of the announced move. The U.S.-based global aerospace and defense company is the leading contractor under the F-35 program. On January 7, the company announced that it delivered 191 F-35s in 2025, exceeding the prior delivery record of 142 jets. Nevertheless, the Wall Street analyst’s forecast for Lockheed Martin is not so bullish. Despite a 1.5 trillion defense budget proposal, Trump warned the defense companies.
Trump Warns Major Defense Companies, Issues Executive Order
President Donald Trump warned major defense companies that he would not tolerate large dividends, stock buybacks, and high executive compensation while weapons production and maintenance remain slow in his post on Truth Social yesterday, January 8. He further added that defense companies are prioritising shareholder payouts and executive pay over building modern production plants or new weapons. President Trump also stated that dividends, buybacks, and excessive executive pay, including compensation above $5 million, will be restricted until companies significantly boost production capacity.
The White House issued an executive order to prevent defense contractors from conducting stock buy-backs or issuing dividends at the expense of accelerated procurement and increased production capacity. The order further directed Pete Hegseth, Secretary of War, to identify, within 30 days and on an ongoing basis, defense contractors supplying critical weapons or equipment that are underperforming, failing to invest adequately in production capacity, deprioritizing U.S. government contracts, or producing too slowly, while simultaneously engaging in stock buybacks or shareholder distributions.
Earlier in his Truth Social post on January 7, President Trump warned the major defense contractor, Raytheon. He stated that he had been informed by the Department of War that Defense Contractor Raytheon is the least responsive to the needs of the Department of War.
He further added that either Raytheon steps up and starts investing in more upfront investments like Plants and Equipment, or they will no longer be doing business with the Department of War.
