Dear Reader,
Good morning!
Today is Friday, January 9th and yesterday was… Eventful.
I originally planned on doing a part 2 to my "Robotaxi Wars" email yesterday.
I wanted to tell you about the top companies winning the war right now, and cut through a lot of the fake news about many of these robotaxi companies' "successes"...
But I'll have to save that update exclusively for Breakthrough Wealth subscribers.
Because Dylan is back on Monday!
So he picks the topics now…
AND because President Trump just dropped some major bombs on us Wednesday that we really should address today.
So let's break it down.
If you were watching defense stocks over the last 72 hours, you probably experienced a little whiplash.
Wednesday, some of the biggest names in the sector got hit hard.
Thursday, many of those same stocks ripped higher.
Wednesday's selloff was triggered by President Trump's comments and directives aimed at defense contractors.
The message was blunt: if companies aren't delivering weapons and systems on time, they shouldn't be prioritizing dividends, buybacks, or outsized executive compensation.
Now markets hate uncertainty around capital returns, especially in a sector where dividends and buybacks have been a big part of the story.
So stocks like Lockheed Martin, Northrop Grumman, General Dynamics, and others sold off as investors adjusted their short-term expectations.
That reaction made sense.
Defense stocks are often owned because of their reliability and dividends.
So when you threaten the "steady" part, money pulls back first and asks questions later.
But then came yesterday…
And yesterday, the market focused on the other half of the message.
At the same time Trump was criticizing financial engineering, he was also very clear about something else: he wants a dramatically stronger, better-funded U.S. military.
Bigger budgets. Faster production. More capacity.
When investors put those two pieces together, the picture changes.
Yes, there may be pressure on dividends or buybacks in the near term…
But the trade-off is potentially much larger as demand for these defense products soar over the next several years.
And in this industry, long-term demand wins.
That's why you saw such a sharp reversal yesterday. The market stopped obsessing over next quarter's capital allocation and started looking out three… five… ten years.
Defense companies don't live or die on vibes. They live or die on backlog.
And if defense spending goes up meaningfully, the backlog goes up with it.
This is where it helps to remember how this sector actually works.
Defense contractors are not consumer businesses.
They don't need people to "feel good" about buying jets, missiles, or submarines.
They need government budgets, multi-year contracts, and political alignment.
Trump's message, stripped of the theatrics, was essentially this: "I want output, not optics."
That's not bearish for defense. If anything, it's a demand signal — just paired with tougher expectations.
What the market did yesterday was price in that reality. Investors decided that even if shareholder returns get nudged around the edges, the core business is likely to expand.
This is also why the rebound wasn't limited to one or two names. It was broad across the sector.
Once traders realized this wasn't an anti-defense stance but a pro-production stance, the narrative flipped. Defense went from "political risk" back to "strategic priority."
And that distinction matters.
There's another layer here that's easy to miss if you're only watching daily price moves.
Markets may flinch at the tone, but they ultimately respond to the direction of cash flows. More production requirements usually mean more contracts, more capex, and eventually more revenue.
That's why the initial panic didn't last.
Listen, none of this means there won't be volatility ahead.
There probably will be.
Any time politicians get directly involved in how companies allocate capital, markets will react.
But if you step back, the signal coming through the noise is pretty clear.
The U.S. isn't backing away from defense spending.
It's doubling down on it — with strings attached.
And historically, when governments get serious about output, the companies that can actually deliver tend to do very well over time.
Even though many investors like defense companies for their steady growth over their explosive gains…
It doesn't mean defense companies can't have explosive gains.
I mean… we've closed defense trades as high as 310%... 120%... and 60%...
All in the past 2 years alone.
So if you're interested in taking advantage of Trump's new defense
push -
(And you want to read the TRUTH about the Robotaxi Wars)...
Sign up for Breakthrough Wealth here to learn more.
You'll get instant access to the little-known defense companies in our open portfolio + you'll be on the on list to receive our next major defense stock alerts.
So make sure to sign up right away.
It's not always so obvious where the next investment opportunity lies…
But this administration has done a pretty good job of telling us exactly where to invest next.
It's been a pleasure talking to you all this week.
Back to your regular scheduled programming on Monday.
All the best,
Simmy Adelman, Editor-in-Chief
Behind the Markets
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