Defense Stocks and Global Risks

Kevin W. Frisz
Jan 8
5 min read

Updated: Jan 20

January 8, 2026

Summary

Today is only the fifth trading session, but it feels like a month at least. Stocks overall are unchanged. But there’s a big split between tech and non-tech. Big cap tech is falling, but everything else is having a pretty good day. (The tech-heavy Nasdaq 100 is -0.7%. The average S&P 500 stock is +0.8%.)

Below we have a review of the defense stocks and Venezuelan oil impact. And I’ve also included a “global risk dashboard” to keep track of hotspots and their potential impact on the market.

Defense Stocks Swing

For defense stock holders, President Trump had two shocking updates yesterday. Both updates swung the defense stock prices sharply.

The first update:

Defense companies should not pay dividends or buyback stock, and they should limit senior exec salaries. Instead, they should build more weapons and build them faster. Well, the stocks didn’t like that. The defense shares fell 5%-ish yesterday. (A secondary question: can he do that? Legally, no. But will the companies be able to say no?)

However!

The second update:

After the close, the President said the US military budget should increase by 50% from $1 trillion to $1.5 trillion. Whoa nellie! As you might expect, the defense stocks are rallying back today, +5% or more.

Below is a table of the key defense companies which might benefit.

Now, a big question: is that even possible? Well, technically, yes. A normal bill requires 60 votes to pass in the Senate. And this would have no chance of that. However, since it’s a budget item, Congress could use the reconciliation process which requires only 50 votes in the Senate to pass. That’s how the One Big Bill was passed in 2025.

To qualify for reconciliation, it would need to meet all sorts of arcane Senate rules about classifications and such. The bigger hurdle might be getting past the budget-hawks on the Republican side. So… I wouldn’t say “likely”, but it’s “possible”.

Venezuelan Oil

Yesterday at a Goldman Sachs Energy conference, the US Energy Secretary gave a important update about Venezuela’s oil production. Two main points. Near-term and long-term.

Near-term Situation

First, the US is going to control the flow of oil from Venezuela “indefinitely”. (Well… okay.) Step one, the US will take the oil currently in Vez’s oil storage facilities. That is the “30-50 million barrels” that the President mentioned the other day. It will be sold in the global market by the US.

The US will also supply equipment and supplies to keep the oil wells flowing. That oil will be sold (via the US) into the global markets and processed by US refiners. This will keep Vez producing oil at about the same rate as it was before recent US intervention. Except the oil will go into the official market, not to China in secret.

Long-term Situation

The next step will take considerably longer: The Energy Secretary is in discussions with US majors to determine what conditions will be necessary for them to invest in new production facilities in Vez. The two primary obstacles are: (1) security and (2) the high cost of “lifting” that type of oil. The rule of thumb for that type of oil is a price of $80 or higher to break even on pulling it out of the ground. As of this morning, the price is $61.

So net-net, we’re a ways away from a significant increase in supply coming from Vez.

Another curious question (but not market related): what’s going to happen to the money from the oil sales? The Energy Secretary said it would be stored in “US controlled” accounts and would be directed towards “stabilizing the Venezuelan economy” and repaying the US majors from repatriation back in 2007.

Global Risks Dashboard

Doesn’t it feel like the world is on fire at the moment? Well, let’s set up a dashboard to track these risks and their potential impact on the markets.

Venezuela

Potential market impact: oil market (high), stock market (low)

Risk level: falling

The stock market seems to be looking past Venezuela. Any notion that this might lead to a larger global conflict with either China or Russia (Vez’s two major partners) is completely absent. So that’s good! Hopefully it stays that way. The impact on the oil market is becoming more clear too. It’s going to take some time for that tsunami of oil to get released.

Nato and Greenland

Potential market impact: enormous

Risk level: falling (hopefully)

The talk about using military action to take Greenland would mean the end of NATO. That alone has a series of VERY dramatic ramifications that are kinda hard to predict. Thankfully tho, it seems like cooler heads are prevailing. Both the speaker of the house and the Senate majority leader said just recently that no one is seriously considering military action to take Greenland. Now, their influence over the President is questionable (at best). But the fact that they’re willing to say so publicly is calming the market’s worst fears. But this could change quickly.

Iran revolution

Potential market impact: oil market (high), stock market (low)

Risk level: rising

You might not have caught it on the news, but over the past couple weeks, Iran is undergoing a sweeping number of riots and protests that are actually threatening to upend the Islamic leadership. The impact to the stock market is minimal. But given Iran’s oil reserves (and its place in the middle east more broadly), events there should shake the oil market.

China and Taiwan

Potential market impact: between “very high” and “existential”

Risk level: simmering

A few weeks ago now, China executed a series of military drills near Taiwan to simulate an attack and invasion of the island. As we discussed yesterday, that would be extraordinarily bad. The US’s aggressive moves to claim the oil flow from Venezuela is a big poking stick at China. But they dont seem to have reacted much. We’ll keep watch.

Final Thoughts

In our 2026 outlook yesterday, I accidentally left something out. The midterm elections in November! My fault.

The betting markets expect the Democrats to win back the House of Representatives, and the Republicans to keep control of the Senate. That “split govn” would mean an official block to any major legislation (except some rare bi-partisan agreement on something). So the impact to the market is “not much”.

But in the meantime, the Republicans are focused on “Reconciliation 2.0”, which would be a clean-up of items that didnt get into the One Big Bill in 2025, as well as the massive increase in defense spending that the President is requesting.

Tick-Tock, Mister Speaker!