US defence stocks have kicked off 2026 with a strong performance, building on the momentum from the previous year. Escalating geopolitical tensions and rising military spending plans are driving investor interest and propelling stock values in the sector to new heights.
Several major defence contractors have experienced significant gains in the early weeks of the year. L3Harris Technologies, a global leader in aerospace and defence technology, and Huntington Ingalls Industries, America’s largest military shipbuilder, both saw their shares climb by 11 per cent in the first five trading days of 2026. This surge was partly influenced by a rally following a US military operation in Venezuela. Other key players, including Northrop Grumman, have also recorded notable increases of 4 per cent or more, while drone manufacturer AeroVironment has experienced a substantial jump of 40 per cent.
Despite a temporary dip on Wednesday following President Trump’s proposals to curb dividends and buybacks, the sector rebounded on Thursday after his call for a substantial $1.5 trillion in security spending for the upcoming year. These early gains build on already strong performances from the previous year, with L3Harris increasing by 40 per cent and Northrop Grumman rising by 22 per cent.
Investors are drawn to the sector’s potential amid rising global security spending, with companies like AeroVironment seen as key players in the evolving landscape of modern warfare. Jay Hatfield, chief investment officer for the Infrastructure Capital Equity Income ETF, suggests there are further opportunities for growth within the market. He highlighted Lockheed Martin Corp as a potentially undervalued stock poised for gains, stating that the current administration’s more hawkish stance, combined with reasonable valuation, creates an attractive risk-reward profile for investors.
The robust performance of defence stocks in early 2026 underscores the sector’s resilience and its critical role in national security strategies. As geopolitical tensions continue to shape global dynamics, defence contractors are likely to remain at the forefront of investor interest, driven by both strategic necessity and financial opportunity. The sector’s ability to adapt to new challenges and innovate in response to evolving threats will be key to sustaining this momentum.