Dear Reader,
Today I want to talk about President Trump's 2027 defense budget request — and why it's historic.
A Budget Unlike Anything We’ve Seen
When Trump took office, the defense budget was around $900 billion.
His first year, it crossed $1 trillion — the first time in U.S. history the military budget had ever done that.
Now he's requesting $1.5 trillion for 2027.
That's nearly a 50% jump.
The headline number is shocking, but in context it makes sense — it brings us back to Cold War-era levels of defense spending, roughly 5% of GDP.
After the Berlin Wall fell, defense spending dropped steadily from 5% to 4% to 3% of GDP.
We didn't need to contest the Soviet Union everywhere anymore, and the peace dividend flowed into paying down debt and getting our fiscal house in order.
That's a big reason the 1990s were such a prosperous decade.
But here we are.
China has risen; the U.S. has to prepare for that.
And the best way to avoid a war with China is to make absolutely clear we have the biggest, baddest stick on the block.
The Two Biggest Winners in This Budget
The Navy is finally getting serious attention.
The shipbuilding budget is set to double — from $27 billion to $65 billion.
This is very important.
History makes clear: nations with dominant navies are dominant powers.
China's navy already outnumbers ours…
Plus, they're building ships at roughly 200:1 rate vs. our manufacturing capacity.
We cannot hold our position without a serious response, and this budget begins to address that.
The Space Force is the other big winner.
Its budget request of $71 billion represents a 77% year-over-year increase.
A lot of people ask me why there's suddenly so much interest in the moon.
Remember something:
The first move in the next major conflict won't happen on the ground — it will happen in space.
Satellites will fight each other.
Weapons launched from Earth will target assets in orbit.
And the moon represents the ultimate high ground in that kind of competition.
Governments around the world understand this, which is why they're racing to position assets there.
The Specific Companies Benefiting
On the shipbuilding side, the big winners so far are General Dynamics (SYM: GD) and Huntington Ingalls (SYM: HII).
The Pentagon is also asking Lockheed Martin (SYM: LMT) for 85 brand-new F-35 jets from — up from 47 last year.
And the Army is expanding its fleet of Armored Multipurpose Vehicles, which are manufactured by Britain's BAE Systems.
We own or have recommended most of these in our model portfolios — General Dynamics, Lockheed Martin and BAE.
How to Play It
If you want broad exposure to this defense spending surge without picking individual stocks, take a look at the iShares U.S. Aerospace & Defense ETF (SYM: ITA).
It's a straightforward, set-it-and-forget-it way to participate.
Have a wonderful Thursday. I'll see you tomorrow.
“The Buck Stops Here,”
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Written by Dylan Jovine