AI spending garners plenty of attention. But it’s got a long way to go to get anywhere near global defense expenditures. Recent news flow confirms global defense spending is accelerating. That phenomenon is not limited to the U.S., China, and Russia. Evidence suggests the war with Ukraine is taking a toll and Russia’s defense spending could decrease modestly next year. Other countries will significantly pick up the slack. This underscores the case for ETFs such as the Direxion Daily Aerospace & Defense Bull 3X Shares ETF (DFEN).
As its name implies, DFEN is a leveraged ETF. It attempts to deliver 300% of the daily performance of the Dow Jones U.S. Select Aerospace & Defense Index. In other words, DFEN is an event-driven ETF best used over short holding periods. Fortunately for risk-tolerant traders, the current state of the global defense industry provides a steady stream of headlines pertinent to defense equities and ETFs such as DFEN.
DFEN’s Tale of the Tape
The bulk of the components in DFEN’s index are domestic companies. But many generate fair amounts of their sales beyond the U.S. That’s pertinent to traders considering the Direxion ETF because, as noted above, more countries are boosting defense budgets.
Following a recent incursions into Polish airspace by Russian drones and amid the lingering war in neighboring Ukraine, Poland is lifting defense expenditures. At the Warsaw Security Forum on September 30, Polish Defense Minister Wladysław Kosiniak-Kamysz said 2026 defense in the country will reach a record 4.8% of GDP.
“Recent violations of Polish, Romanian and Estonian airspace are clear evidence that Russia is testing our alliance… The Kremlin’s aggressive policy poses a real and direct threat to Europe’s security, and we know that Russia’s goals are not limited to Ukraine,” he said at the event.
South Korea faces its own set of geographic challenges, and that’s not lost on President Lee Jae Myung. In October 1 remarks, he noted defense spending there will surge 8.2% to $47.1 billion next year. Some of those sales could be notched by members of the Dow Jones U.S. Select Aerospace & Defense Index, potentially providing ballast to DFEN.
More catalysts for DFEN could be on the horizon because the U.S. remains adamant that NATO allies contribute their fair share. Matthew Whitaker, the U.S. permanent representative to NATO, said as much at the Transatlantic Forum on GeoEconomics on September 30, noting “it’s going to be the big countries like Germany, France, Great Britain, Italy that are going to really determine whether Europe steps up.”
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