US defence stocks have commenced 2026 with robust performance, continuing the strong momentum from the previous year. Escalating geopolitical tensions and corresponding increases in military spending plans are fueling investor interest and driving up stock values within the sector. Several major defence contractors are experiencing significant gains in the early weeks of the year.
L3Harris Technologies, a global aerospace and defence technology innovator, and Huntington Ingalls Industries, America’s largest military shipbuilder, have both seen their shares climb by 11 per cent in the first five trading days of 2026. This surge was partly influenced by a rally following the US military operation in Venezuela. Other key players in the industry, 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 $US1.5 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 security spending globally, while companies like AeroVironment are 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.
