Investors flock to defense funds as geopolitical risks reshape market landscapes.

  • Aerospace and defense ETFs have outperformed the S&P 500 amid rising Middle East tensions.
  • The Invesco Aerospace & Defense ETF has gained 46.6% over the past year, surpassing the S&P 500’s 34.7% increase.
  • The iShares U.S. Aerospace & Defense ETF and SPDR S&P Aerospace & Defense ETF also showed strong performance.
  • Invesco’s fund attracted nearly $1.4 billion in inflows, while the iShares ETF experienced outflows of $653 million.
  • Geopolitical risks, particularly from Iran and Israel, are influencing market dynamics.

This week, aerospace and defense exchange-traded funds (ETFs) have shown remarkable resilience, outperforming the S&P 500 as tensions in the Middle East escalate. According to Ed Yardeni, president of Yardeni Research, the ongoing conflict poses a significant risk to the stock market’s bull run. Recent missile attacks from Iran on Israel have heightened these concerns, prompting warnings from the White House about potential severe consequences. While the S&P 500 has dipped by 0.7% this week, the leading aerospace and defense ETFs, including the iShares U.S. Aerospace & Defense ETF (ITA), Invesco Aerospace & Defense ETF (PPA), and SPDR S&P Aerospace & Defense ETF (XAR), have maintained their upward momentum. The Invesco ETF, with approximately $4 billion in assets, has surged by 24.9% this year, outperforming the S&P 500 by over 5 percentage points. Over the past year, it has skyrocketed by 46.6%, significantly outpacing the SPDR S&P 500 ETF Trust’s 34.7% rise. The iShares ETF, managing around $6 billion, also performed well with a 44.6% increase. Smaller ETFs like the Global X Defense Tech ETF and First Trust Indxx Aerospace & Defense ETF have seen even higher gains of 58.7% and 48.2%, respectively. In terms of fees, the SPDR S&P Aerospace & Defense ETF is the most cost-effective among the top three, with an expense ratio of 0.35%. The Invesco fund has a higher expense ratio of 0.57%. Portfolio construction varies among these ETFs, with the Invesco fund allocating nearly 6% to information technology, while the iShares ETF is more top-heavy with its largest holdings. Notably, the Invesco ETF’s top positions include major players like Lockheed Martin, RTX Corp, and Boeing. The Invesco fund has attracted significant inflows, totaling almost $1.4 billion over the past year, contrasting with outflows from the iShares ETF. As geopolitical tensions continue to evolve, these aerospace and defense ETFs are becoming increasingly attractive to investors seeking stability in uncertain times.·

Factuality Level: 7
Factuality Justification: The article provides a detailed analysis of aerospace and defense ETFs, including performance data and expert opinions. However, it contains some tangential information and could benefit from a more focused narrative. While the data presented appears accurate, the inclusion of personal opinions and speculative statements may detract from its overall objectivity.·
Noise Level: 6
Noise Justification: The article provides relevant information about aerospace and defense ETFs in the context of current geopolitical tensions, supported by data and analysis. However, it lacks deeper insights into long-term trends or systemic resilience, and while it presents some data, it does not fully explore the implications of the information provided.·
Public Companies: Lockheed Martin Corp. (LMT), RTX Corp. (RTX), GE Aerospace (GE), Boeing Co. (BA), Northrop Grumman Corp. (NOC), Palantir Technologies Inc. (PLTR), Amphenol Corp. (APH), Teledyne Technologies Inc. (TDY), Axon Enterprise Inc. (AXON), TransDigm Group Inc. (TDG), Curtiss-Wright Corp. (CW), L3Harris Technologies Inc. (LHX), Howmet Aerospace Inc. (HWM)
Private Companies: Yardeni Research,CFRA Research,Invesco,State Street Global Advisors,Calamos Investments,Roundhill Investments,Cambria Investment Management
Key People: Ed Yardeni (President of Yardeni Research), Aniket Ullal (Head of ETF Research and Analytics at CFRA Research)

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Financial Relevance: Yes
Financial Markets Impacted: Yes
Financial Rating Justification: The article discusses aerospace and defense ETFs, which are financial instruments that pertain to investment markets. It highlights the performance of these ETFs amid geopolitical tensions in the Middle East, indicating that these events impact financial markets. Specifically, it mentions the gains of the Invesco Aerospace & Defense ETF and others, which are directly affected by the ongoing conflict and investor sentiment surrounding it.·
Presence Of Extreme Event: Yes
Nature Of Extreme Event: Armed Conflicts and Wars
Impact Rating Of The Extreme Event: Major
Extreme Rating Justification: The article discusses escalating tensions in the Middle East, specifically mentioning Iran’s missile attack on Israel, which has intensified geopolitical tensions and poses a significant risk of wider conflict. This situation has implications for global security and economic stability, warranting a major impact rating.·
Move Size: 24.9%
Sector: Aerospace and Defense
Direction: Up
Magnitude: Large
Affected Instruments: ETFs

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