While the U.S is diminishing its standing military presence overseas, namely in the Middle East, other countries have picked up the slack, potentially fueling growth in defense sector stocks and related exchange traded funds.
Year-to-date, the iShares U.S. Aerospace & Defense ETF (NYSEArca: ITA) rose 10.9%, PowerShares Aerospace & Defense Portfolio (NYSEArca: PPA) increased 14.2% and SPDR S&P Aerospace & Defense ETF (NYSEArca: XAR) gained 11.4%.
As the U.S. pulls out of Afghanistan and Iraq and engages in peace talks with Iran, neighboring countries are feeling less secure and are increasing spending for defense equipment, reports Abigail Stevenson for CNBC.
For instance, Raytheon (NYSE: RTN) received a $2.4 billion for Patriot missiles order from Qatar, Northrop Grumman Corp (NYSE: NOC) saw a $657 million order for unmanned armed vehicles, and Lockheed Martin (NYSE: LMT) received a $308 million order for F-16 fighter planes from Taiwan.
Additionally, the crisis in Ukraine and the rampaging Islamic State have put many eastern European countries on edge.
“A host of European countries, growing mistrustful of their U.S. allies are said to be considering multibillion-dollar orders for the antimissile defense system,” Mad Money Host Jim Cramer said in the article.