Defense stocks fell as the prediction market Polymarket priced Democratic control of the House at 0.915 and of the Senate at 0.645 ahead of the November 3 midterms. The iShares U.S. Aerospace & Defense ETF (ITA) closed at $207.76 on October 19, 2026, down 17.86% from its August 14 close, while Northrop Grumman (NOC) fell 1.77%, Lockheed Martin (LMT) 0.70% and RTX 0.93%. Trump's proposed 2027 military budget of $1.5 trillion, a roughly 42% increase, still needs congressional approval and could be trimmed by a Democratic majority, though munitions and readiness spending has bipartisan support. Northrop has been hit hardest, trading 34% below its 52-week high because its growth depends on the B-21 and Sentinel programs, while Lockheed and RTX have held up better on missile demand and commercial aerospace. Earnings from NOC and RTX on October 20 and LMT on October 22 will show whether demand holds.
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