How PM Mark Carney’s Military Spending Spree is Fueling the TSX
Billions in new government funding under PM Mark Carney are waking up a historically sleepy sector of the TSX, but economists warn the macroeconomic impact might be inflated by accounting methodologies.
Forget the polite diplomacy; Canada’s traditionally quiet defense sector is suddenly making a lot of noise on the trading floor. Investors are currently laser-focused on billions in new government funding, as a recent Desjardins report highlights an "eyewatering increase" in weapons purchases since Prime Minister Mark Carney took the helm last year.
Driven by mounting tensions with the United States, Ottawa committed in 2025 to its most significant military spending hike since the Second World War. The federal government has earmarked a massive $81.8 billion over five years to fortify the Canadian Armed Forces. Market enthusiasm really kicked into high gear when Carney appointed former Goldman Sachs banker Doug Guzman to oversee the deployment of these funds through a newly minted government agency, effectively waking up a historically sleepy corner of the stock market.
According to Desjardins deputy chief economist Randall Bartlett, the deployment of those dollars is living up to the considerable hype. At the end of 2025, inflation-adjusted Canadian purchases of weapons systems skyrocketed by more than 800 percent quarter-over-quarter annualized, hot on the heels of a 1,300 percent advance in the previous quarter. To put that in perspective, real spending on weapons systems last year nearly doubled the historical peak hit in 2010 during the War in Afghanistan.
This flood of capital is creating a serious bullish buzz for domestic military, tech, and aerospace suppliers. Take space robotics leader MDA Space (TSX: MDA), whose shares have surged roughly 60 percent year-to-date. CEO Mike Greenley recently noted an unprecedented surge in global defense spending on space, with strategic procurements moving at a much faster clip.
Over on the venture exchange, Newfoundland and Labrador’s Kraken Robotics (TSXV: PNG), renowned for high-resolution sonar that helps underwater drones distinguish rocks from naval mines, has seen its stock jump about 40 percent in 2026 and over 300 percent in the last twelve months. The surge is backed by a $45.8 million contract with the Department of National Defence. Meanwhile, Ottawa-based Calian Group (TSX: CGY), a major military healthcare and training provider, has enjoyed a 45 percent year-to-date climb, effectively doubling its share price over the past year.
The procurement pipeline shows no signs of slowing down. Ottawa recently announced nearly $1 billion for National Research Council defense initiatives, which includes snapping up a Bombardier (TSX: BBD.B) jet and funding a new drone innovation hub. On the horizon is a staggering $24 billion slated for a new fleet of submarines to replace Canada’s aging aquatic vessels, with a final supplier decision expected this year.
However, before investors go all-in, a dose of macroeconomic reality might be required. Bartlett expressed some skepticism about the broader economic impact, suggesting Statistics Canada's broad definition of military weapons systems might be skewing the narrative. Because government accounting spreads these capital investments over an asset's lifespan while excluding single-use items like bullets, Bartlett warned that some of the recent spike could be chalked up to a methodological accounting change rather than entirely new net spending. As a result, these eye-popping investment figures could see downward revisions in the future.
Source material: Adapted from "Weapons buying under PM Carney an 'eyewatering increase' for Canada: Desjardins" by Jeff Lagerquist, Yahoo Finance Canada (March 10, 2026).