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Trump’s $1.5 Trillion "Dream Military" and the Defense Dividend Crackdown

Kavout

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In January 2026, President Donald Trump proposed a massive $1.5 trillion military budget for the 2027 fiscal year, representing a roughly 50% increase over previous spending levels. This announcement caused significant stock market volatility as investors weighed the benefits of record-breaking contract volumes against a new Executive Order aimed at curbing corporate payouts. Under this "production-first" policy, the administration intends to freeze dividends and share buybacks for defense contractors that fail to meet strict manufacturing and efficiency standards. Major firms like Lockheed Martin, Northrop Grumman, and RTX initially saw share prices dip due to these financial restrictions before rallying on the prospect of historic revenue growth. Ultimately, the industry faces a paradigm shift where the government acts as an active manager of the defense industrial base, prioritizing industrial capacity and modernization over traditional shareholder returns.

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