Defense & Aerospace

Moderate Sector Overweight

Geopolitical tensions aren't going away. NATO allies are ramping defense spending, and the US defense budget keeps growing. This portfolio captures the multi-year defense spending cycle.

3
ETFs
0.8%
Aggregate Yield
$31.4B
Wtd Avg AUM

Holdings

Symbol Name Weight Price 1D 3M YTD Yield AUM
ITA iShares U.S. Aerospace & Defense ETF 45% $223.50 ... ... ... 0.5% $13.9B
PPA Invesco Aerospace & Defense ETF 30% $167.63 ... ... ... 0.4% $8.0B
ITOT iShares Core S&P Total U.S. Stock Market ETF 25% $161.16 ... ... ... 1.0% $91.1B

Investment Thesis

The post-2022 geopolitical landscape has fundamentally changed defense spending trajectories. NATO members have committed to 2% of GDP minimums, with many moving toward 3%+. The US defense budget has grown every year and bipartisan support remains strong. European rearmament is a multi-decade theme — Germany alone announced a 100 billion euro special fund. This isn't a short-term trade; defense procurement cycles run 5-10 years from contract to delivery. The major primes (Lockheed Martin, RTX, Northrop Grumman) have backlogs measured in years, and supply chains are constrained. The 25% ITOT allocation provides diversification against sector-specific risks like contract cancellations or budget disputes.

Portfolio Construction

ITA iShares U.S. Aerospace & Defense ETF
45%
US aerospace & defense companies — concentrated in the major primes like Lockheed Martin, RTX, Boeing, Northrop Grumman, and General Dynamics. These companies have multi-year order backlogs and limited competition.
Yield: 0.5% AUM: $13.9B
PPA Invesco Aerospace & Defense ETF
30%
Broader defense contractors and suppliers — includes mid-cap defense companies, cybersecurity firms, and supply chain players that benefit from increased defense spending without the mega-cap concentration.
Yield: 0.4% AUM: $8.0B
ITOT iShares Core S&P Total U.S. Stock Market ETF
25%
Broad market to reduce single-sector risk — provides exposure to the entire US economy, ensuring the portfolio isn't entirely dependent on defense spending trends.
Yield: 1.0% AUM: $91.1B

Key Considerations

  • Defense stocks can be politically sensitive — budget fights or peace developments could pressure the sector
  • Long procurement cycles mean revenue growth is slow and steady, not explosive
  • Concentrated in a single sector with limited diversification
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