With global tensions mounting, defense stocks are expected to surge even higher.
Earlier this week, defense stocks pulled back after President Trump said he would not allow dividends or buybacks for defense companies until arms production speeds up.
“Defense Companies are not producing our Great Military Equipment rapidly enough and, once produced, not maintaining it properly or quickly,” said President Trump, as quoted by CNBC. Until those companies build new production plants, “no Executive should be allowed to make in excess of $5 Million Dollars,” Trump added.
However, they’re benefiting from Trump’s calls for a $1.5 trillion defense budget.
As he said on Truth Social: “After the long and difficult negotiations with Senators, Congressmen, Secretaries, and other Political Representatives, I have determined that, for the Good of our Country, especially in these very troubled and dangerous times, our Military Budget for the year 2027 should not be $1 Trillion Dollars, rather $1.5 Trillion Dollars. This will allow us to build the ‘Dream Military’ that we have long been entitled to, and, more.
If you want to diversify with defense stocks, at a lower cost, one of the best ways to do that is with an exchange traded fund (ETF), such as:
SPDR S&P Aerospace & Defense ETF (SYM: XAR)
The SPDR S&P Aerospace & Defense ETF seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P Aerospace & Defense Select Industry Index. The XAR ETF has an expense ratio of 0.35%.
Some of its top holdings include Rocket Lab, Aerovironment, Kratos Defense & Security, Boeing, Heico Corp. and GE Aerospace to name a few of its 40 holdings.
iShares U.S. Aerospace & Defense ETF (SYM: ITA)
The iShares US Aerospace & Defense ETF invests in stocks in the domestic aerospace and defense sector. These stocks can include companies that manufacture both commercial and military aircraft as well as other types of defense-related equipment. The ITA ETF has an expense ratio of 0.38% at the moment.
Some of its top holdings include GE Aerospace, RTX Corp., Boeing, L3Harris Technologies, Lockheed Martin, and Northrop Grumman to name a few of its 41 holdings.
Invesco Aerospace & Defense ETF (SYM: PPA)
The Invesco Aerospace & Defense ETF tracks a market-cap-weighted index of US-listed stocks involved in the defense, military, homeland security and space industries. The PPA ETF has an expense ratio of 0.58%. Some of its top holdings include Boeing, General Electric, RTX Corp., Lockheed Martin, Northrop Grumman, and General Dynamics.
Must Read Spotlight: Wall Street Legend says this $15 Stock could be the #1 stock of the year
One of the market's greatest sleeper stocks may be about to wake up.
And Wall Street has begun to take notice.
The ticker shot up 5% in a single week as analysts recently raised its price target - and elevated the stock from a Hold to a BUY.
In fact, one 50-year Wall Street legend just named it his #1 stock of 2026 - live, on-camera.
When you see the role this company is playing in a $269 billion market, you'll understand why he's telling his 800,000 followers to put $1,000 into the stock NOW.
(And why BlackRock even made a multi-billion-dollar offer to buy the company behind it.)
Right now, institutional investors hold over 50% of the stock.
But the tide may soon be about to change, as more and more retail investors catch onto its extraordinary potential.
The best part?
As of this writing, it's trading just around $15 a share.
That's one-twelfth the price of Nvidia (NVDA).
So if you missed out on NVDA's extraordinary runup...
This is your rare second chance to get in NOW, before this undervalued stock could become one of the best-performing stocks of the new year.
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Written by Ian Cooper