What You Need to Know About Defense ETFs

They’re some of the hottest trades on the market.

Nearly every defense ETF Exploded higher after Trump inked a weapons deal with the Saudis worth nearly $350 billion over the next 10 years.  Nearly every one ran even higher after Donald Trump asked for approval on a $668 billion defense budget, too.

A budget of that size would increase the Defense Department’s budget to $574.6 billion, buy six ships, new fighter jets, 15 new KC-46 air tankers, which are used for aerial refueling and help grow the U.S. military by another 56,000 new service members. 

That’s one of the biggest defense budgets in the world.

No wonder defense ETFs have become some of the hottest trades on the market.

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Plus, it’s tough to argue with the returns as of July 2017.  The iShares U.S. Aerospace & Defense ETF (ITA) that recently ran from a low of $149 to $160. The SPDR S&P Aerospace & Defense ETF (XAR) ran from $66 to $71.50.

All as their holdings have exploded on Trump news, too.

  • Raytheon (RTN) ran from $156 to $162.50
  • Boeing (BA) ran from $175 to $184
  • General Dynamics (GD) ran from $191 to $199
  • Northrop Grumman (NOC) ran from $243 to nearly $252

Better yet, as long as Trump moves to strengthen the U.S. military, related stocks and ETFs are likely to remain strong for quite some time, too.  The underlying fundamentals are powerfully strong.  Even technically, it’s tough to fault the ETF opportunities.

For example, as of June 2017, the ITA continued to hold its 50-day moving average.  In fact, each time it has tested that line for the last year, it finds support, and runs higher.  We expect to see more of the same as long as the military takes center stage.

The question isn’t, “when should I hold such ETFs.”

It’s “why haven’t you been holding them?” 

Investors should take note of the very bullish fundamental catalysts that are driving the defense sector to outperform even the S&P 500, which it had as of late June 2017. Better still, the run in such ETFs isn’t likely to fail with a Republican controlled Congress and Donald Trump in office looking to significantly boost defense spending.

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