Baystreet readers may remember that I’ve been high on defence stocks over the past several years. Contractors in the United States like Lockheed Martin and Raytheon have benefited from ballooning U.S. defence spending. It is a sure bet that this budget will increase into the next decade, but what investors may not realize is that other nations are quietly following suit.
Europe’s combined defence spending total has been steadily rising since 2015. It is now nearing $300 billion annually, which still pales in comparison to the U.S. defence budget which was now passed $700 billion. China and Russia, two nations that have emerged as geopolitical rivals to the U.S. in this century, have also committed to increased military spending over the past several years.
The relative decline of U.S. power, and the rise of economies like China and India, is ushering in a new multi-polar world. Not only will trade become a point of contention, but nations will look to beef up their ability to project power militarily as well.
Investors who want to capitalize off this environment should consider the iShares Aerospace & Defense ETF (NYSE:ITA). It seeks exposure to U.S. companies that manufacture commercial and military aircrafts and other defence equipment. Some of its top holdings include Boeing, United Technologies, and Lockheed. The ETF has surged 35.6% in 2019 as of close on November 19. This is an ETF I’m excited to hold for the next decade.
