Aerospace stocks and exchange traded funds have been among the most obvious beneficiaries of Donald Trump’s stunning ascent to the White House, a theme some investors will continue after Trump officially takes the Oval Office later this month.
Other potential catalysts for aerospace ETFs include include, renewed airline pricing power evidenced by higher ticket prices, and more fees paid per traveler, increased airline profitability, new aircraft program launches and continued demand for aircraft models and technology.
Although the aerospace and defense industry is perceived as being beholden to Uncle Sam’s whims, the allure of late-cycle sectors, including industrials, in a rising rate environment remains in place. Industrials perform well when interest rates rise because rising rates can go hand-in-hand with economic growth.
However, the iShares U.S. Aerospace & Defense ETF (NYSEArca: ITA), PowerShares Aerospace & Defense Portfolio (NYSEArca: PPA) and the SPDR S&P Aerospace & Defense ETF (NYSEArca: XAR) were pinched somewhat last month after Trump criticized the Pentagon’s profligate spending habits.
Defense stocks were limping after Trump censured the rising weapons spending, specifically targeting Lockheed Martin Corp.’s F-35 Fighter jet program, the Pentagon’s most expensive weapons system, Bloomberg reports.