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Why Aerospace & Defense ETFs are Soaring in 2019

Neena Mishra

Aerospace & defense stocks and ETFs underperformed the broader market last year, particularly in the fourth quarter, mainly due to trade and tariff concerns as these companies have a lot of exposure to international markets.

They are surging this year, thanks mainly to rising hopes for a US-China trade deal. Boost in defense spending in the US and reports of commitment by NATO members to increase military spending have also benefitted these stocks.

During the State of the Union address, President Trump reaffirmed commitment to higher defense spending and also mentioned that the US has secured a $100 billion increase in spending from NATO allies

Further, many companies in the sector have reported better than expected results. Boeing (BA), in particular, reported blockbuster results and the stock soared after the report. Some other industry leaders like Raytheon (RTN) and Northrop Grumman (NOC) also beat estimates.

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.

At the same time, there are some concerns that widening federal deficit could impact defense spending in the early 2020s.

To learn more about the iShares U.S. Aerospace & Defense ETF (ITA), the SPDR S&P Aerospace & Defense ETF (XAR) and  the PowerShares Aerospace & Defense Portfolio (PPA), please watch the short video above.

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Disclosure: I own ITA in the ETF Investor Portfolio that I manage.


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Lockheed Martin Corporation (LMT) : Free Stock Analysis Report
 
The Boeing Company (BA) : Free Stock Analysis Report
 
Northrop Grumman Corporation (NOC) : Free Stock Analysis Report
 
Raytheon Company (RTN) : Free Stock Analysis Report
 
SPDR S&P Aerospace & Defense ETF (XAR): ETF Research Reports
 
iShares U.S. Aerospace & Defense ETF (ITA): ETF Research Reports
 
Invesco Aerospace & Defense ETF (PPA): ETF Research Reports
 
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