Defense stocks declined after Democrats won control of both the House and the Senate in the midterm elections. Lockheed Martin fell 3.6%, while L3Harris, RTX and Northrop Grumman lost between more than 2% and more than 3% amid concerns that Congress could challenge the Trump administration’s defense spending priorities. These companies rely heavily on U.S. government contracts, which accounted for about 70% of Lockheed Martin’s sales and 75% of L3Harris’s revenue in fiscal 2025. Wolfe Research analyst Myles Walton said the initial sell-off could be short-lived, citing 2006, when defense stocks recovered after Democrats took control of Congress and military spending continued to rise. The fiscal 2027 defense budget is the near-term catalyst, and replacing Defense Secretary Pete Hegseth with a candidate capable of securing congressional approval could support spending.
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