Global military stocks are skyrocketing: Trump's plan to increase military spending by $500 billion annually is the most powerful catalyst.

U.S. President Donald Trump has expressed plans to increase the U.S. military budget, injecting new vitality into global defense sector stocks. At the beginning of the new year, European defense stocks have shown particularly strong performance, indicating that this year the global situation seems to be dominated by political factors led by GEO Group Inc. This year, the U.S. has launched a military operation in Venezuela, and the White House has stated that Trump does not rule out the use of force to acquire Greenland. On Wednesday, Trump requested an increase of $500 billion in annual defense spending. Previously, reports indicated that Trump requested for the annual defense spending to increase by more than 50% by 2027, reaching $1.5 trillion. In addition, on Wednesday, Trump also signed an executive order requiring major U.S. defense contractors working with the government to stop stock buybacks, cease paying dividends, and set a cap of $5 million on executive pay annually, until they increase investment in factories and research and development to accelerate growth. On Thursday, a basket of European defense stocks compiled by Goldman Sachs Group, Inc. rose by as much as 3.8%, with an increase of about 13% for the week so far. In the U.S., Northrop Grumman (NOC.US) and Lockheed Martin (LMT.US) surged over 8% in pre-market trading, rebounding from the previous day's decline caused by Trump's call to limit executive pay and shareholder returns in the industry. Asian defense stocks also rose, including Korea's Korean Aerospace Industries, Taiwan's Aerospace Industrial Development Corporation, and Japan's Defense Machinery Corporation. "Politics surrounding GEO Group Inc. is an unavoidable theme in 2026," said Neil Wilson, a UK investment strategist at Saxo Markets. In Europe, the companies with the largest gains include BAE Systems in the UK. The company, which gets nearly half of its revenue from the U.S., saw its stock price rise by as much as 7%. The German heavy equipment manufacturer Rheinmetall saw its stock price rise by 4.1%, reaching its highest level since October last year. "Limitations on capital returns are a gradual negative impact, but manageable in scale," said Morgan Stanley analyst Christine Levage in a report. She also noted that restrictions on dividends and stock buybacks could release billions of dollars for investment in capacity expansion or mergers and acquisitions.