U.S. Defense Spending Could Push This ETF Even Higher

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When it comes to defense spending, the United States is head and shoulders above the rest of the globe. A Brookings Institute report emphasized the willingness of the U.S. to shore up its military, especially in a time when geopolitical tensions exist.

“Shifting focus to an international perspective, in 2023, the United States spent a towering $905.5 billion on defense, more than twice what the rest of NATO spends ($397.7 billion),” the report noted. “Meanwhile, U.S. rivals and adversaries collectively spent an estimated $301.6 billion, with China accounting for approximately $219.5 billion and Russia for $74.8 billion.

“In fact, U.S. defense spending accounted for over 40 percent of the global total for military expenditures,” the report added. “These figures underscore the immense scale of U.S. defense spending relative to that of other nations and are often cited by those who advocate for a smaller defense budget.”

Increased defense spending will be a boon for stocks focusing on aerospace and defense (A&D). In turn, this could prop up the Direxion Daily Aerospace & Defense Bull 3X Shares ETF (DFEN). The fund is up over 30% within the past year.

Tripling the Leverage on Aerospace & Defense

DFEN seeks daily investment results equal to triple the exposure to the Dow Jones U.S. Select Aerospace & Defense Index. The index attempts to measure the performance of this industry of the U.S. equity market.  Boeing, Raytheon, and Lockheed Martin currently occupy the top three holdings.

The fund’s performance is extraordinary given that a majority of its allocation is directed toward Boeing. The aircraft manufacturer has had its fair share of struggles as of late, but the fund’s other holdings — like Lockheed Martin — are helping to mute the effects of Boeing. The stock is up just over 50% within the last five years and should reap the benefits of more spending dollars from the U.S. government.

“Unfortunately for the world, the ongoing geopolitical conflicts, including in Gaza and Ukraine, only increase the likely demand for defense and weapons products like what Lockheed Martin builds,” Yahoo Finance noted.

Like the rest of Direxion’s roster of leveraged ETFs, DFEN gives traders the ability to:

  • Magnify short-term perspective with daily 3X leverage.
  • Go where there’s opportunity, with bull and bear funds for both sides of the trade.
  • Stay agile with liquidity to trade through rapidly changing markets.

For more news, information, and analysis, visit the Leveraged & Inverse Channel.

Article by Ben Hernandez, ETF Trends

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