The $1 Trillion "Defeat"

Every headline since the midterms says the same thing: Democrats are going to block Trump’s $1.5 trillion defense budget.

And almost every one of those stories buries the most important number near the bottom.

When Bloomberg asked what “blocking” actually means, a person familiar with Democratic planning said the new majorities would likely approve around $1 trillion.

One trillion dollars…

That’s the “defeat” that gave defense stocks the steepest losses on Wall Street the day after the election. And that’s why I’m convinced the market has this one backwards.

The selloff is handing investors a chance to buy some of the best-run companies in America at a discount they haven’t earned.

A Cut That’s Actually a Raise

Congress approved $901 billion for national defense in fiscal 2026. So, a $1 trillion budget for fiscal 2027 is roughly $100 billion more.

That’s an 11% raise in a single year. And that’s the low end.

In fact, Jefferies expects the final number to land closer to the House’s roughly $1.15 trillion proposal, which would be a 28% jump.

Even the Democrats concede the floor. Their only objection, as Bloomberg reported it, is to “a defense budget in excess of $1 trillion.”

The fight is over how far past $1 trillion the Pentagon goes, not whether it gets there.

Add the $150 billion Republicans handed the Pentagon in last year’s tax bill, some of it still unspent, and the “blocked” budget is the biggest base defense budget in American history, passed while U.S. forces are still fighting in the Middle East.

If that’s what losing looks like, I’d like the companies I own to lose like that every year.

Wall Street Cheered This Exact Number 18 Months Ago

In April 2025, the White House put a roughly $1 trillion defense budget on the table for fiscal 2026.

Defense stocks surged on the news, and Morgan Stanley upgraded its view of the whole sector to “attractive.”

Eighteen months ago, $1 trillion was a reason to buy defense stocks. But this month, it’s a reason to dump them.

The only thing that changed is the anchor…

Investors spent most of 2026 pricing in $1.5 trillion, so anything less now registers as a loss. But that’s just a headline problem. The businesses didn’t change.

The day after the election, Lockheed Martin (NYSE: LMT) fell 6.88% to $595.04, and L3Harris (NYSE: LHX) dropped 6.9%.

By week’s end, the Associated Press had Northrop Grumman (NYSE: NOC), Lockheed, RTX (NYSE: RTX) and General Dynamics (NYSE: GD) down anywhere from 4% to 12%.

Meanwhile, Costco and Procter & Gamble rallied. Essentially, the market decided toothpaste was a better bet than missile interceptors during a war.

Back in September, I wrote that Wall Street was selling defense at the wrong time. The midterms just gave it another excuse.

The Orders Are Already Signed

Three weeks before Election Day, Lockheed reported third-quarter sales of $20.7 billion, up 11% from a year earlier.

Plus, it raised full-year guidance for the second straight quarter and lifted its dividend for the 24th year in a row.

But the backlog is the number that matters most…

Lockheed ended September with a record $292 billion in signed contracts, up $113 billion in a year, and booked four dollars of new orders for every dollar it delivered.

A seven-year, $52.5 billion PAC-3 interceptor order helped triple its missile backlog.

And CFO Evan Scott told analysts that much of next year’s work is already under contract and in progress.

RTX tells the same story…

Its backlog hit a record $340 billion, with $164 billion on the defense side, up 59% from a year ago.

Raytheon, the company’s defense unit, saw its order book jump from $86 billion in June to $130 billion in September on multiyear Tomahawk and AMRAAM contracts.

And 37% of that backlog comes from foreign customers, with international bookings running at 2.5 times last year’s pace.

Just in case you were wondering, a Democratic House doesn’t get a vote on what our allies buy.

These are multiyear production deals, folks.

A contractor doesn’t win a missile contract in October and lose it in November because control of Congress changed.

And a $1 trillion budget doesn’t threaten that work. It pays for it.

Where the Fight Actually Is

Democrats will have a say in where the money goes, and that tells you which companies to own.

Bloomberg named Trump’s Golden Dome missile shield and his Trump-class battleship plan as the splashiest ambitions now in limbo.

So, the brand-new programs are the ones most exposed.

But restocking is a different story…

Wars in Ukraine and the Middle East have drained American and allied stockpiles of interceptors, cruise missiles and air-to-air missiles.

You can’t deter anybody with an empty warehouse. And the contracts to refill those warehouses are already sitting in the backlogs I just walked you through.

Those are definitely some of the names I want to own while the headlines scream “cut.”

Priced Like the Bad News Is Real

After the latest leg down, Lockheed trades around 17.6 times free cash flow, while Wall Street expects earnings growth of nearly 18% a year.

That’s double-digit growth, a record backlog and a 24-year streak of dividend raises, priced off a headline that leaves out the most important number in the story.

Defense primes are supposed to be the dull corner of a portfolio.

But boring can be beautiful. And right now, Wall Street is selling boring at a discount.

What Comes Next

Every quarter that Lockheed and RTX turn those backlogs into sales and cash, the gap between the headlines and the earnings gets harder to ignore.

That’s when this disconnect between reality and what the media is selling closes. And I want to be positioned before it does.

The trick is owning the contractors sitting right in front of money that’s already committed, rather than the ones hoping a new program survives the budget fight.

And that’s where my colleague Jason Simpkins comes in.

He’s spent years tracking military budgets and weapons programs, and inside Power & Profits, he’s showing subscribers the defense plays he thinks are best positioned for exactly this kind of setup.

So, if you’ve been waiting for a better entry point into defense, the midterms just gave you one.

Click here to see where Jason Simpkins is looking now.