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Why Aerospace & Defense ETFs are Soaring

Neena Mishra

Aerospace & defense stocks and ETFs are ripping higher, thanks mainly to rising hopes for a US-China trade deal and improving growth outlook. With worries about trade and growth receding, investors have been rotating out of defensive areas of market and into cyclicals.

Cyclical sectors are most exposed to economic growth and trade, and this rotation could continue if the economy remains on solid footing and trade situation improves. Fed’s dovish turn has also boosted riskier areas of the market.

Rising geopolitical tensions have resulted in increased defense spending all over the world. Global air traffic continues to expand and rising middle class in emerging economies would be a key source of air travel demand going forward. This would continue to support the commercial aerospace businesses over the long-term.

The iShares U.S. Aerospace & Defense ETF (ITA) is a market-cap weighted ETF. Boeing (BA) gets almost 21% weighting in the fund. Other top holdings are Lockheed Martin (LMT) and United Technologies (UTX).

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The SPDR S&P Aerospace & Defense ETF (XAR) follows an equal-weighted index while the PowerShares Aerospace & Defense Portfolio (PPA) tracks a modified market cap weighted index.

To learn more about these ETFs, please watch the short video above.

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The Boeing Company (BA) : Free Stock Analysis Report
 
United Technologies Corporation (UTX) : Free Stock Analysis Report
 
Invesco Aerospace & Defense ETF (PPA): ETF Research Reports
 
iShares U.S. Aerospace & Defense ETF (ITA): ETF Research Reports
 
SPDR S&P Aerospace & Defense ETF (XAR): ETF Research Reports
 
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Zacks Investment Research
 
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report