US military stocks sector V-shaped reversal: Threatening to prohibit dividends and limit compensation, Trump proposes to increase annual defense budget by 50% to $1.5 trillion.

Trump has requested that the United States increase its annual defense spending by over 50% to reach $1.5 trillion in 2027, which is an unprecedented increase. He stated that this spending will be funded by the revenue generated from tariffs imposed last year. This request would mark the largest increase in U.S. military spending to date, as the national security budget for the current fiscal year has already been approved at $901 billion. Trump wrote on social media, "This will enable us to build the 'dream army' we have long deserved, and more importantly, it will ensure our security regardless of who the enemy is." He indicated that the "massive revenue" from tariffs will be used to fund this spending, as well as to pay off national debt and provide "generous dividends" to "middle-income patriots." Given the White House's previous attempts to cut some Pentagon spending as part of Elon Musk's cost-cutting plan, this request contradicts other priorities of the Trump administration. According to data from the Peter G. Peterson Foundation, U.S. defense spending already surpasses the total of the next nine countries. However, tariff revenue is unlikely to fully cover this increase. According to data from the U.S. Treasury Department as of September 30 this year, tariff revenue amounts to approximately $195 billion. Trump also mentioned that he hopes Congress will use the increased tariff revenue to issue $2,000 tariff refund checks to the majority of Americans. Trump's request requires approval from Congress. He stated that he made this decision after engaging in a "long and difficult negotiation" with senators, representatives, and other political representatives. Before proposing an increase in the budget, Trump harshly criticized defense contractors for slow production on social media, threatening to ban stock repurchases, cancel dividends, and restrict executive compensation. In response to this, defense stocks collectively declined during regular trading hours: Northrop Grumman (NOC.US) closed down 5.5%, Lockheed Martin (LMT.US) closed down 4.8%, Raytheon Technologies (RTX) closed down 2.5%, and General Dynamics Corporation (GD.US) closed down 4.2%. Following Trump's announcement to raise the 2027 defense budget to $1.5 trillion, stock prices immediately reversed course. As of the time of writing, Lockheed Martin surged 6.4% in after-hours trading, Northrop Grumman rose 5.7%, Raytheon Technologies increased 3.4%, and General Dynamics Corporation rose 4.4%.