Defense Stocks vs the S&P 500: 25 Years of Returns
Every Middle East flare-up sends defense stocks higher. The Iran strikes in February 2026 added another double-digit move to a sector that has been quietly compounding for two and a half decades. We already covered the 2026 conflict-driven rally in detail. This post zooms out and asks the longer question: how have defense stocks actually performed against the S&P 500 since 2000?
The answer is more nuanced than the headlines suggest. Some defense names crushed the index. Others trailed it. And the timing of when you bought mattered enormously.
The 26-year scoreboard
$1,000 invested in each major U.S. defense contractor in early 2000 and held through the Iraq War, Afghanistan, the financial crisis, the Trump defense buildup, COVID, the Ukraine war, and the 2026 Iran conflict.
| Stock | $1K became | Total return |
|---|---|---|
| Lockheed Martin | $63,236 | +6,224% |
| Northrop Grumman | $51,196 | +5,020% |
| RTX (Raytheon) | $20,006 | +1,901% |
| Boeing | $6,902 | +590% |
| S&P 500 (SPY) | $7,387 | +639% |
Lockheed Martin, Northrop Grumman, and RTX all dramatically outperformed the S&P 500. Lockheed turned $1,000 into over $63,000 - more than 8x what the index returned. Boeing, the other major name, slightly underperformed the index over the same 26 years despite enormous defense exposure. Same sector, very different outcomes.
What drove the long-term winners
Three things separate Lockheed and Northrop from Boeing over this period:
- Pure-play exposure to U.S. military procurement. Lockheed's F-35 program alone has generated over $400 billion in revenue since 2000. THAAD, the Patriot missile defense system, and PAC-3 interceptors all sit inside Lockheed and Raytheon. Defense procurement only goes one direction over decades, and these companies have most of the contracts.
- Capital returns. Lockheed has bought back roughly half its share count since 2000 and pays a meaningful dividend. Northrop has been similarly aggressive on buybacks. Compounding earnings per share through buybacks is what turns a 5% organic growth business into a 17% annualized stock return.
- Stable margins. The fixed-price/cost-plus mix in defense contracting means margins are predictable. The market pays a premium for that predictability, especially during equity selloffs when uncertainty rises.
Why Boeing trailed the S&P 500
Boeing's 26-year story is two collapses on top of strong defense exposure. The 737 MAX grounding cost the company over $20 billion in direct charges and years of lost commercial deliveries. The Starliner program has been a multi-year disaster. The COVID era hit commercial aviation harder than almost any other sector.
The defense side of Boeing did fine. The commercial side, which is about half of revenue, dragged the stock to roughly flat versus the S&P 500 over a generation. The data is a useful reminder that "defense stocks" is not a monolith - half of Boeing's business is selling airplanes to airlines, not weapons to governments.
The 10-year window: the conflict era
The 2015-2026 window covers the rise of ISIS, the U.S. exit from Afghanistan, the Russia-Ukraine war, and the 2026 Iran conflict. Defense spending grew nearly every year. Stock performance:
| Stock | $1K (2015) | CAGR |
|---|---|---|
| Northrop Grumman | $5,185 | 15.8% |
| Lockheed Martin | $4,320 | 13.9% |
| Huntington Ingalls | $3,977 | 13.1% |
| RTX (Raytheon) | $3,462 | 11.7% |
| S&P 500 (SPY) | $3,921 | 12.9% |
| Boeing | $1,559 | 4.0% |
Northrop Grumman is the standout of the last decade, with shipbuilding peer Huntington Ingalls close behind. Both benefit from the Navy and nuclear modernization budgets that rose sharply across both Trump and Biden administrations. Lockheed and RTX did well but did not separate from the index by as wide a margin as their 25-year track records suggest.
The 3-year window: tariffs and conflict
From 2023 through April 2026 - the window covering the Ukraine escalation, the 2026 Iran conflict, and the Trump tariff shock - the story is less clean.
- RTX: $1,000 → $2,064 (+106%) - by far the best performer.
- Huntington Ingalls: $1,000 → $1,834 (+83%).
- SPY: $1,000 → $1,662 (+66%).
- Northrop Grumman: $1,000 → $1,596 (+60%).
- Lockheed Martin: $1,000 → $1,416 (+42%).
- Boeing: $1,000 → $931 (-7%) - still working through 737 MAX and Starliner aftermath.
Two of the three big primes (LMT, NOC) trailed the S&P 500 over this window despite the Iran-conflict surge in early 2026. RTX is the only big defense name that meaningfully beat the index. The takeaway: even an active conflict environment is not a guaranteed defense-stock outperformance window.
Three things the 25-year data says
- Defense was an excellent long-term sector. Three of four big primes beat the S&P 500 by huge margins since 2000. The combination of consistent procurement, aggressive buybacks, and margin stability compounded better than the broader index.
- Stock selection mattered more than sector selection. Lockheed beat Boeing by over $56,000 on a $1,000 starting position. Picking "defense stocks" without picking the right ones would have underperformed the index.
- Conflict spikes are short-term, procurement is long-term. The 26-year defense outperformance was driven by structural defense budget growth and capital allocation - not by any single conflict. The 2026 Iran rally is the cherry, not the cake.
Where to go next
Run any defense ticker against SPY in our comparison tool, or browse the full set of defense stocks at our industrial sector page.
Related: Defense stocks and the 2026 Iran conflict | Oil stocks during Middle East conflicts | SpaceX's publicly traded peers