Wolfe Research analysts predict Congress will not approve additional defense funding beyond the already approved $901 billion for fiscal 2026, dampening hopes for President Trump's proposed $1.5 trillion military budget for 2027.

Despite Trump's January announcement calling for significantly higher military spending, defense stocks have already surged, with aerospace and defense sector ETFs showing sustained gains. The analysts, including Tobin Marcus and Chutong Zhu, argue that without a reconciliation bill in 2026, incremental defense funding is unlikely.

Republicans hold slim majorities in both chambers, but the analysts believe even this advantage won't overcome the political hurdles to passing additional defense spending. The sector will need to rely on existing funding streams, including the One Big Beautiful Bill passed last year and ongoing global conflict-related spending, rather than new appropriations.