Some of this year’s best-performing industry exchange traded funds include aerospace and defense ETFs. For example, the iShares U.S. Aerospace & Defense ETF (BATS: ITA), the largest fund in the group, is higher by 21% year-to-date.
ITA is a cap-weighted ETF, meaning it has larger weights to big-name defense stocks, including Dow components Boeing (NYSE: BA) and United Technologies (NYSE: UTX). Aerospace and defense stocks are part of the broader industrial sector and have been important drivers of the sector’s performance over the past year. In fact, aerospace and defense names have been industrial leaders.
“The U.S. plans to increase combat operations in Afghanistan, while the battle against ISIS in Iraq and Syria continues. North Korea’s nuclear program has placed greater urgency on missile defense technology. Passenger jet manufacturers and their suppliers enjoy a long backlog of orders for new-generation planes,” reports Investor’s Business Daily.
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.
Related: Aerospace & Defense ETFs Go Off After North Korea’s Latest Missile Launch