US defense spending record

What happened: Global defense spending hit a record $2.6 trillion in 2025, with the U.S. alone accounting for more than the next eight countries combined. Meanwhile, Japan, the world's third-largest defense spender, increased its military budget and relaxed arms export guidelines, while Baltic states warned of potential debt surges due to Europe's defense spending.

Market impact: Defense contractors like Lockheed Martin, Raytheon, and Northrop Grumman stand to benefit from increased spending. European defense stocks such as BAE Systems and Airbus Defence and Space may face headwinds due to debt concerns. Supply chains linked to defense production could see increased activity.

What to watch next: The U.S. Defense Budget for FY2027 (expected in early 2026) will indicate future spending trends. Japan's defense policy review, due in late 2026, may reveal further shifts in its military strategy. European debt dynamics, particularly in the Baltics, will be closely watched for any signs of strain.