What was said:
Trump has outlined plans to lift US military spending to $1.5 trillion in FY2027, up from the previously discussed $1 trillion, one of the largest peacetime defence expansions on record.
Crucially, this isn’t just about a higher headline number. Proposals to restrict US defence companies' buybacks and dividends point to a push to rein in capacity, directing capital toward production, stockpiles, and operational readiness rather than financial engineering.
This shift is being driven by a widening set of geopolitical pressure points: Venezuela, Iran, Greenland, and the deepening tech cold war with China. Together, they are accelerating a move away from diplomacy toward enforcement, pulling defence spending forward and outward across the supply chain
Why we give a ****:
This is defence turning into industrial policy. Budgets of this scale aren’t about reacting to one conflict; they’re about rebuilding capacity, securing supply chains and preparing for a more unstable world. When governments prioritise output and resilience over shareholder returns, defence demand becomes structural, not cyclical.
For investors, this implies increased visibility, consistent spending, and a sector that performs more like a core allocation rather than a hedge. Defence is not a trade for 2026; it is infrastructure.
Relevant stocks: LSE:BAB, LSE:KIST, VSE:RENK, LSE:BP, LSE:CNE, LSE:RBW
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