Defense ETF Near 100% Rally as U.S. Spending Tops $1 Trillion, Eyes $1.5T Budget
The State Street SPDR S&P Aerospace & Defense ETF has surged nearly 100% since its April 2025 lows, outpacing all sectors except gold miners. U.S. defense spending now tops $1 trillion, with proposals to raise budgets by 50% toward $1.5 trillion likely to expand contractor order backlogs.
1. XAR's Near-100% Rally
The State Street SPDR S&P Aerospace & Defense ETF has rallied nearly 100% since April 2025 lows, matching only gold miners for top sector performance over the period. The 10-month rolling return now exceeds the surge seen after March 2009, driven by elevated geopolitical tensions and replenishment needs.
2. Rising Defense Budgets
U.S. defense spending has surpassed $1 trillion, and proposals for a 50% increase to $1.5 trillion would represent the largest year-over-year boost in decades. Non-U.S. NATO members targeting 3.5% of GDP on defense by 2035 could add roughly $370 billion to global military outlays.
3. AI, Automation and Valuation Outlook
Defense contractors are investing heavily in artificial intelligence, autonomy and enterprise software to meet modern battlefield requirements, with shipbuilding and missile defense systems cited as key growth areas. While valuations have risen, earnings estimates and order backlogs are climbing, suggesting fundamentals may support current price levels.