If you’re an investor with a holding that’s exposed to negative decisions from the second Trump administration, let me offer two thoughts on how to cope.

  • Take a breath.
  • Don’t make any hasty decisions.

Why? Because time may be on your side.

Defense contractors and financial institutions are stocks to watch

I make these observations because of two possible decisions coming along that may affect two sets of stocks: defense contractors and financial institutions.

The defense shares were hit last week when the administration issued an executive order banning what it called excessive CEO compensation, large dividends, or pursuing exorbitant stock buybacks.

The initial release of the order on Jan. 7 hit just about every defense contractor you could think of, and it hit the shares of RTX Corp. (formerly Raytheon Technologies) hardest. RTX developed the feared Patriot missile system, and its Pratt & Whitney engines power the planes on which many of us fly every day.

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Nonetheless, RTX shares fell 2.5% on Jan. 7 and a bit more the next day.

RTX is also part of the iShares U.S. Aerospace and Defense exchange-traded fund. The ETF fell 1.5% on Jan. 7. And, like RTX, the ETF fell a little more on Jan. 8. (RTX represents a bit more than 16% of ETF’s portfolio as of Nov. 30, 2025.)

Since Jan. 7, the shares of both RTX and the ETF have recovered their losses entirely.

RTX is also up 4.5% from its Jan. 7 close. It hit a 52-week high of $197.55 on Tuesday, Jan. 13, before closing at a record $194.08.

The ETF hit a 52-week high of $236.57 on Jan. 12 and a second on Jan. 13 at $239.58. The close at $237.54 was a record.

RTX’s Pratt & Whitney engines are part of the planes on which many of us travel.

Baker/In Pictures via Getty Images

Lesson learned: stocks are resilient

We re-learned a lesson about market resilience when President Donald Trump unveiled his tariff structure in April 2025. The reaction to the tariff announcement sent the S&P 500 Index down 10.5% in just two days. And, as we know, the president and Treasury Secretary Scott Bessent reduced many of the proposed tariff rates, and stocks recovered.

Indeed, the S&P 500 is now up 44% from its April 2025 low. It ended 2025 with a 17.3% gain. And, after just seven trading days in 2026, the index is up 1.73%  — a respectable return, if not gaudy. (But, heck, stocks sagged Jan. 13, as earnings reports didn’t impress.)

So the learning seems to be: Wait, because other things will come up and grab all the attention.

As of Jan. 12 and 13, there were four such other things:

  • First, Federal Reserve Chairman Jerome Powell said he is under criminal investigation for allegedly lying to Congress. Powell, as we know, believes his sin is refusing to cut interest rates as quickly as President Trump would like. Powell’s disclosure generated tons of support from bankers, central bankers and, most importantly, Congress.
  • President Trump proposed that credit card companies give consumers a break and cut the rates on cards to 10% for a year. Credit-card companies, including Synchrony, Capital One Financial, and American Express, slid in response. Synchrony is down 10.2% since Jan. 9.
  • The president also announced that goods from any country that does with business with Iran would be subject to a new 25% tariff. Which sets up, potentially, another trade conflict with China.
  • The president startled markets when he announced to protesters in Iran, “Help is on its way.” What exactly that means was unclear, though The Wall Street Journal reported he was leaning “toward ordering military strikes.”

So, at least on Jan. 13, and as long as the probe of Powell and the Iranian unrest go on, you may not hear too much about defense contractors.

Is there something to the president’s complaint about the defense sector?

It depends.

President Trump’s executive order on dividends, buybacks, and executive compensation isn’t very specific on the standards it wants from its contractors.

Section 2 of the order states its goal is to “accelerate defense procurement and revitalize the defense industrial base to maintain peace through strength.” Then it says, “the United States will no longer allow defense contractors to single-mindedly pursue investor profits at the expense of warfighter capability and readiness.”

But it does not specify what all that means. Obviously, the intent is: Get more product sooner and built in the United States. It just says the Secretary of War (sic) will identify violators of the policy and order them to fix the problem or potentially, lose their contracts.

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That may not be so easy to achieve, many analysts say. The contracts are negotiated word by word and hard to revise.

The prime defense contractors, especially RTX, Northrup Grumman, Lockheed Martin, and Boeing, are huge companies. RTX’s 2025 revenue, for example, is projected at $85 billion. The company employs about 185,000 workers.

They are delivering products that take years to develop.

Raytheon started development of the Patriot missile system in 1976. It was first deployed in 1984 and saw much use in the 1991 Kuwait War. After much refinement and redesign, the system really came into its own during the 2001 Iraq war. It’s now in use all over the world and has helped Ukraine in its war against Russia.

In part because the products take so long to develop, the finances of defense contractors can be especially opaque. When times are good, the contractors can be quite profitable because there’s global demand for all their products. (About 44% of RTX’s business is overseas.)

Sales to foreign customers are more profitable, Sheila Kahyaoglu, aerospace and defense analyst at Jefferies, told CNBC earlier this month.

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And the companies can returns gobs of cash to shareholders as buybacks or dividends.

In a Jan. 7 note, Morningstar analyst Nicolas Owens wrote that the top seven defense contractors bought back $128 billion in stock in the prior 10 years. That represents about 2.5% of their average market capitalization.

About 55% of free cash flow at RTX goes to dividends and buybacks and capital expenditures, Kahyaoglu says. About 45% goes to research and development.

That’s the kind of thing that gets President Trump’s attention. And he has groused that RTX has been slow on deliveries and slow to adjust prices.

But a comparison should be made. Nvidia generated $61.6 billion in free cash flow from operations through its fiscal third quarter ended Oct. 26, 2025. It spent $36.3 billion on share repurchases, about 59% of the total.

If the president wants to, he can easily invite RTX CEO Christopher Calio over for a chat about the company’s spending and investing practices. The company’s Arlington, Va., headquarters overlooks the Potomac River across from Washington, D.C. The White House is just a 15-minute drive away.

How RTX is organized

RTX has three main lines of business:

  • Collins Aerospace makes aircraft components and systems.
  • Pratt & Whitney is one of the biggest makers of jet engines for commercial and military aircraft.
  • Raytheon provides missiles, missile defense systems (like the Patriot system), sensors, and secure communications almost exclusively to government agencies. 

The businesses have done well, but there was a costly hiccup at Pratt & Whitney over the last 15 years when a rare powder-metal defect cause tiny cracks in high-pressure turbine compressor parts on engines built for Airbus passenger jets.

Pratt & Whitney spent billions of dollars to fix existing and new engines for customers. And RTX shares slumped badly in 2022 and 2023. The problem is mostly resolved, and the stock was up 58.5% in 2025, better than the returns for the S&P 500 and the iShares Aerospace & Defense ETF.

Perhaps the administration’s demands can force RTX and others to streamline its businesses. Or perhaps smaller competitors, such as AeroVironment, can take business away from the big contractors.

It will all take time and patience.

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