Defense and Aerospace ETF Capitalizes on Dual Market Surge

The iShares U.S. Aerospace & Defense ETF is experiencing a powerful upswing, propelled by two distinct yet powerful economic forces. A global surge in military expenditure coincides with a robust recovery in the commercial aviation sector, creating a unique growth environment for this specialized fund.

Aerospace and defense giants are witnessing unprecedented demand from both government and commercial customers. Global defense spending reached a monumental $2.4 trillion in 2023, with no signs of slowing. The United States is projected to exceed a $1 trillion military budget for the first time in 2025, directing substantial funds toward naval construction, ammunition, and missile defense systems.

Simultaneously, the commercial aviation industry is posting its strongest performance in years:
- Passenger traffic surged 11.9% year-over-year in 2024
- Forecasts indicate further growth of 5.8% in 2025
- Boeing and Airbus maintain record order backlogs

While technological breakthroughs in artificial intelligence, unmanned systems, and advanced air mobility are accelerating industry transformation, persistent supply chain disruptions remain a significant challenge.

Strategic Concentration in Market Leaders

The ITA ETF employs a highly selective investment strategy, holding just 41-43 individual positions. This focused approach targets the most established players in the U.S. defense sector, with the fund's top ten holdings commanding a dominant 75% of its total assets.

Should investors sell immediately? Or is it worth buying iShares U.S. Aerospace & Defense ETF?

Key portfolio allocations include:
- Raytheon Technologies: 22.5%
- Boeing: 13.5%
- Lockheed Martin: 10.8%
- Northrop Grumman: 7.2%
- General Dynamics: 6.1%

This concentrated structure reflects the underlying market reality, where a handful of prime contractors control the majority of defense contracting.

Sustainability of the Current Rally

Market observers are questioning how long the current boom can persist. Multiple indicators suggest continued strength, driven by expanding government budgets, technological superiority, and ongoing geopolitical uncertainties. However, the sector's performance remains inherently tied to global political stability.

The iShares U.S. Aerospace & Defense ETF demonstrates how defense equities can serve as relative safe havens during periods of international tension, effectively navigating the complex landscape of global security concerns.