Defense contractor shares swung sharply this week after President Donald Trump criticized major military suppliers on Truth Social for paying billions in dividends and stock buybacks while underinvesting in production capacity, then reversed investor anxiety by proposing a $1.5 trillion defense budget for fiscal year 2027.
Shares of Lockheed Martin, Northrop Grumman, General Dynamics, and RTX — the parent of Raytheon — fell on Trump’s initial posts, then recovered after he announced the proposed budget, which would represent a substantial increase from the $901 billion allocated for 2026.
Trump’s paired actions — a populist challenge to corporate shareholder returns followed by a massive proposed spending increase — created a volatile week for the defense sector, which faces potential new restrictions on capital allocation even as it stands to benefit from a significantly enlarged pool of government contracts.
The criticism
In posts on Truth Social, Trump said defense contractors are “currently issuing massive Dividends to their Shareholders and massive Stock Buybacks, at the expense and detriment of investing in Plants and Equipment.”
“This situation will no longer be allowed or tolerated,” Trump said. “I will not permit Dividends or Stock Buybacks for Defense Companies until such time as these problems are rectified.”
Trump also targeted executive compensation, calling pay packages in the defense industry “exorbitant and unjustifiable.” He proposed barring defense company executives from earning more than $5 million until new production and maintenance facilities are built, describing the $5 million figure as “a mere fraction of what they are making now.”
Market reaction
The initial criticism sent contractor shares lower. Northrop Grumman lost 5.5%, Lockheed Martin fell 4.8%, General Dynamics dropped 4.2%, and RTX — which Trump specifically named in his posts — declined 2.5%.
The budget proposal
Trump then announced a proposed defense budget of $1.5 trillion for fiscal year 2027, up from the $901 billion provisioned for 2026.
“I have determined that, for the Good of our Country, especially in these very troubled and dangerous times, our Military Budget for the year 2027 should not be $1 Trillion Dollars, but rather $1.5 Trillion Dollars,” Trump said. “This will allow us to build the ‘Dream Military’ that we have long been entitled to and, more importantly, that will keep us SAFE and SECURE, regardless of foe.”
The budget proposal lifted contractor shares. Lockheed Martin rose 4.3%, Northrop Grumman gained 2.4%, General Dynamics added 1.7%, and RTX rose 0.8%.