As the world watches Syria, concerns are building over military action by Western powers. The Obama administration continues to push for a military strike in order to punish the Syrian regime’s use of chemical weapons, although Russia and others remain staunchly opposed to such action.
This tension is largely having a negative impact on U.S. securities, reintroducing some volatility back into the market. However, the worries have actually been pretty good news for one sector of the economy, the defense industry (See Aerospace and Defense ETF Investing 101).
Defense Industry in Focus
The aerospace and defense sector was thought to be a victim of the sequester and the cuts in military spending earlier in the year, but the space persevered despite these worries. Now, with the possibility of military action, the sector is once again in the spotlight and could see a higher level of demand should a strike take place.
Given this, a look to the sector may be an interesting short term idea for traders who believe that the Syrian crisis is just beginning. While a single stock approach could be a way to go, an ETF technique may also be an interesting idea, especially when looking at either of the following top Ranked ETFs:
SPDR S&P Aerospace & Defense ETF (XAR)
This fund has close to three dozen securities in its basket, and is quite spread out among component stocks, putting just 35% in large caps. The ETF charges 35 basis points a year in fees, while it has added close to 31% in the year-to-date time frame (see Play a Surging Defense Industry with These 3 ETFs).
iShares U.S. Aerospace & Defense ETF (ITA)
This ETF holds about 35 stocks in its basket, putting the bulk of its assets in large cap stocks like UTX, BA, and LMT. The fund charges investors about 46 basis points a year in fees, and it has surged by 29% so far in 2013.
For more information on defense ETFs and how they might fare in the current environment, watch our short video on the subject below:
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