With the 2024 election thoroughly decided, we now have a clearer picture of what the next four years will look like for defense stocks. And it’s a bright one.
First, if you want to know how defense stocks like Lockheed Martin (NYSE: LMT), Northrop Grumman (NYSE: NOC), General Dynamics (NYSE: GD), RTX (NYSE: RTX), and other others will perform going forward, just look at what they did during Trump’s first term.
Northrop Grumman surged 64% from 2016–2020. RTX climbed 52%.
And Lockheed Martin (NYSE: LMT) more than doubled in value, surging 109%.
That trend continued through the Biden administration, as well. In the past four years, LMT is up 45%, RTX is up 33%, NOC is up 50%, and GD is up 68%.
The forces behind these gains are clear — rising defense budgets and global conflict. And both of those catalysts will remain firmly in place for the foreseeable future.
The Pentagon’s budget topped out at a record $895 billion for the current fiscal year. That’s 22% higher than it was when Biden took office.
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The U.S. defense budget rose an astonishing 37% under Donald Trump, climbing from $534 billion in 2016 to $733 billion in 2020. Defense spending as a percentage of GDP also increased under Trump, going from 3.1% to 3.4% in that time.
We’ll likely see a similar increase this time around too. Especially since Republicans have captured the House and Senate, effectively clearing the runway.
Don’t expect any budget fights in at least the next two years. You won’t see any caps on spending or hostage-taking with the debt ceiling. Even the most ardent deficit hawks in the House Freedom Caucus will remain perfectly silent on the issue as the defense budget is jacked up to $1 trillion.
When it comes to specific initiatives, that’s a little murkier. Throughout his campaign, Donald Trump pledged to build a missile shield over the United States akin to the Iron Dome in Israel.
All manner of defense companies will profit from the surge.
Not only that, but we’re likely to see record-high military spending throughout the rest of the world, as well.
Again, this was a hallmark of Trump’s first turn as president and it’ll be an even bigger trend in the second.
The key thing to remember about Trump’s relationship with America’s allies is that it’s adversarial. He doesn’t view American military support as a strategic asset, responsibility, or policy tool. He views it as a protection racket.
Famously, over the summer, Trump said he would encourage Russia to do “whatever the hell they want” to America’s European allies. He’s repeatedly denigrated NATO, falsely accuses members of being “delinquent,” and will likely attempt to withdraw America from the alliance altogether.
Whether or not he succeeds in that effort, Europe knows it can no longer rely on America to defend its interests. This is a major reason — along with Russia’s belligerence — that European defense spending has soared in the past decade.
NATO Europe is on track to spend roughly $380 billion on defense this year, which is double the amount spent in 2014.
As a result, a record 23 of 32 NATO members are set to clear the alliance’s 2% of GDP spending guidance this year. That’s up from just three in 2014, but still not enough. Especially for the countries nearest to Russia.
Former victims of Soviet aggression, like Poland, Finland, Latvia, Lithuania, Estonia, are rightfully concerned that if Russia conquers Ukraine — something that Trump seems determined to let happen — they’ll be next. So they’re pushing to raise the defense spending guidance from 2% to as much as 3%.
And that’s at minimum. In reality, some countries will have to go even higher than that.
“When we analyze what the countries need to develop in the near future, for a decade maybe, it’s not even 2.5%,” Lithuanian Defense Minister Laurynas Kasčiūnas told Defense News. “It’s not even 3%. It should be more if you want more air defense systems, if you want more long-range strike capabilities.”
Not only that, but other American allies in the Pacific — like Japan, South Korea, and Australia — will be forced to raise their own defense spending to compensate for America’s abandonment.
That’s not great news with respect to global stability or America’s credibility, but it’s going to benefit defense contractors, further juicing U.S. arms exports that are already at a record high.
Indeed, sales of American weapons, ammunition, and equipment to foreign countries climbed 55% last year to a record-high $81 billion. And 2024 is shaping up to be another banner year.
So the bottom line is this…
Global conflict and America’s political tack back toward isolationism — characterized by the ongoing conflicts in Ukraine and the Middle East, as well as Donald Trump’s blatant contempt for foreign intervention — have given rise to a decade-long increase in domestic and global defense spending.
And a second Trump term is set to bring more of the same.
Expect more chaos, more violence, more hostility, and more spending.
The result may be dire for the world at large, but it’ll be a net gain for the defense industry.
And if investors are smart, they’ll act accordingly. You might even consider signing up for my Secret Stock Files investment service, which covers the most advanced defense technologies, stocks, and investment opportunities.
Fight on, Jason Simpkins Simpkins is the founder and editor of Secret Stock Files, an investment service that focuses on companies with assets — tangible resources and products that can hold and appreciate in value. He covers mining companies, energy companies, defense contractors, dividend payers, commodities, staples, legacies and more… In 2023 he joined The Wealth Advisory team as a defense market analyst where he reviews and recommends new military and government opportunities that come across his radar, especially those that spin-off healthy, growing income streams. For more on Jason, check out his editor’s page. Be sure to visit our Angel Investment Research channel on YouTube and tune into Jason’s podcasts. Want to hear more from Jason? Sign up to receive emails directly from him ranging from market commentaries to opportunities that he has his eye on. 
