In 2018, the United States spent $716 billion on defence, an amount which President Donald Trump called “crazy” in a recent Twitter diatribe. Trump signed off on the spending package back in August. Currently the United States spends approximately 17% of its federal budget on defence.
Do not let Trump’s Twitter rhetoric confuse you; the U.S. is set to spend even more on its military in 2019. Earlier this month, a U.S. official hinted that Trump was ready to back a spending increase to $750 billion next year.
The Pentagon was originally slated to request $733 billion for fiscal 2020. Geopolitical tensions between the United States and its rivals has intensified in late 2018, which has likely ramped up urgency ahead of the New Year.
The Invesco Aerospace & Defence ETF (NYSE:PPA) fell 2.18% on December 17. Shares are down 3.9% in 2018 so far after gaining 30% in 2017. Some of its top holdings include United Technologies (NYSE: UTX), Boeing (NYSE: BA), Lockheed Martin (NYSE: KMT), and Raytheon (NYSE: RTN).
There are legitimate fears of a recession creeping up in 2019, but the defence sector will continue to see large injections of cash. This has emerged as a global trend in an increasingly multi-polar world, and the United States has demonstrated that it is willing to outspend its competition to maintain its hegemony.
The Invesco Aerospace and Defence ETF may be one of the few safe bets to track in 2019.
