Greater defense spending will provoke arms races. This argument holds that more military funding would be self- defeating, by spurring America’s adversaries to undertake their own buildups. But there are already arms races underway; U.S. rivals just happen to be the ones racing the hardest. China has been increasing its military spending by double-digit annual increments for roughly two decades. Russia, even with its economy in a shambles, has been pouring money into a buildup meant largely to offset traditional U.S. and allied strengths.

And Iran, with its nuclear program on ice, is testing new missiles and doing whatever else it can to shift the balance in the Persian Gulf. Failing to counter those buildups, and to limit the opportunities for successful coercion or aggression, would be the more destabilizing course.
 

Eoin Treacy's view

The US public have seen hundreds of billions spent on two wars with questionable outcomes and have little appetite for spending on more adventurism. On the other hand most people understand the benefits that accrue from having the world’s most powerful military and maintaining a sufficient deterrent against adversaries which appear to do nothing but seek comparative advantage. 

President Trump is unlikely to want to wade into international conflict but at the same time will wish to ensure he has resources on hand should he need to. For a trader and deal maker that just makes sense. 

The S&P 500 Aerospace & Defense index has been trending higher in a reasonably consistent manner since early 2009 and surged higher following the Presidential election. It is somewhat overbought in the short-term but a sustained move below the trend mean would be required to question medium-term scope for additional upside.