Defense firms fall as Democratic victory stokes fears of tighter Pentagon budget
XLI•U.S. defense shares fell after Democrats’ midterm election victory raised concerns about pressure on Pentagon spending. Lockheed Martin and L3Harris each dropped 6.9%, while RTX fell 3.1%.
1. Defense shares decline
U.S. defense shares fell on Wednesday as investors worried a Democratic-controlled Congress could pressure Pentagon spending plans. Lockheed Martin shares dropped 6.9%, RTX fell 3.1%, L3Harris Technologies sank 6.9%, and Huntington Ingalls Industries declined 4.9%; General Dynamics and Northrop Grumman also fell.
2. Budget expectations shift
Jefferies analysts said they expect the 2027 defense budget to be closer to the House’s roughly $1.15 trillion proposal than the administration’s $1.5 trillion request. Analysts said a Democratic-led House could scrutinize defense budgets and new programs more closely, even if support for military modernization remains broadly intact.
3. Programs and sector context
TD Cowen analyst Roman Schweizer said Trump-branded programs, including Golden Dome and the Golden Fleet, were “dead.” The analysts identified nuclear modernization, including Northrop’s B-21 bombers, and the Sentinel intercontinental ballistic missile replacement as programs “least at risk.” The S&P 500 Aerospace & Defense sub-index was down nearly 1% this year, while the Dow Jones U.S. Aerospace & Defense sub-index was down 3.4%.
