‘Skinny‘ $60bn Better Than Nothing: Defense Funding Moves Forward with Initial $60bn Reconciliation Package

Research evidence excerpt

‘Skinny‘ $60bn Better Than Nothing: Defense Funding Moves Forward with Initial $60bn Reconciliation Package

Update

July 15, 2026 07:19 PM GMT

Morgan Stanley & Co. LLCMDefense | North America Kristine T Liwag

Equity Analyst

“Skinny” $60bn Better Than Kristine.Liwag@morganstanley.comJustin M Lang +1 212 761-2980

Justin.Lang@morganstanley.com +1 212 761-6251

Nothing Jason T Holcomb

Research Associate

Defense Funding Moves Forward with Initial $60bn Reconciliation Package Jason.Holcomb@morganstanley.com +1 212 761-5592

Gabrielle Knafelman

We view the House Budget Committee's new $60bn defense reconciliation package ResearchGaby.Knafelman@morganstanley.comAssociate +1 212 761-4838

proposal as a net constructive development for the defense sector, not because of Shaina C Zuber

the absolute dollar amount, but because it provides the first tangible step toward Research Associate

Shaina.Zuber@morganstanley.com +1 212 761-6353

expanding defense spending and reduces some of the uncertainty that has weighed

on investor sentiment. While this latest proposal is below both the previously Defense

North America

discussed $67bn figure for an Iran supplemental and the administration's earlier Industry View Attractive

$350bn defense reconciliation request, we do not believe defense stocks have been

pricing in a meaningful incremental budget tailwind from reconciliation. Instead,

valuations have reflected uncertainty surrounding the timing and magnitude of

additional appropriations, particularly with the FY27 budget process unfolding

ahead of the 2026 midterm elections. Against that backdrop, we view legislative

momentum as more important than the initial funding amount, as it reinforces that

the direction of travel for U.S. defense spending remains higher.