Defense Spending Surge and ETF Performance

What happened: Defense spending has surged, driving performance in aerospace and defense ETFs. The iShares U.S. Aerospace & Defense ETF (ITA) returned 17% in 2025, while the First Trust Indxx Aerospace & Defense ETF (FTA) significantly outperformed over the trailing 12 months. Meanwhile, the iShares U.S. Aerospace & Defense ETF (ITA) and the iShares EURO STOXX Global Select Dividend ETF (EUAD) have been opposite expressions of U.S. versus European defense spending, with EUAD surging 55% in 2025.

Market impact: The defense spending surge has benefited established U.S. defense contractors, as seen in ITA's performance. However, gains in EUAD, which tracks European defense budgets, hinge on these budgets converting to signed contracts. Investors are also considering actively managed, tech-heavy ETFs like ARK Space & Defense Innovation ETF (ARKX) for exposure to the space economy.

What to watch next: Investors should monitor EUAD's ability to hold its gains, as it depends on European defense budgets materializing into contracts. Additionally, watch for earnings reports from key defense contractors in both U.S. and European ETFs, as well as any updates on global defense spending trends. Lastly, keep an eye on ARKX's performance and its ability to attract investors seeking exposure to the space economy.