As Geopolitical Risks Continue, Get Thrice the Exposure to Defense

The S&P 500 Aerospace & Defense index is up 12% for the year with Russia’s invasion of Ukraine giving the index a shot in the arm. As geopolitical risks continue, traders can continue to ride the aerospace and defense sector for opportunity.

Despite the latest geopolitical developments, the U.S. was already expected to up the ante on its defense spending. The invasion only magnified what was to come in terms of government spending.

“Even before the Russia and Ukraine conflict became front-page news, there was a clear shift in military spending aimed at thwarting potential near-peer threats,” says Stifel analyst Bert Subin in a Kiplinger article.

Per the article, “the fiscal 2022 omnibus spending bill signed into law by President Joe Biden in mid-March includes $728.5 billion for defense – a 4.7% increase over fiscal 2021 – as well as $13.1 billion for humanitarian, military and economic assistance to Ukraine. And Biden’s fiscal 2023 budget earmarks another $813 billion for defense spending.”

^SPXAD Chart

Strong YTD for DFEN

The aerospace and defense sector should keep exhibiting strong growth through the rest of 2022 given the latest geopolitical catalysts. Russia’s invasion of Ukraine only put the world on watch, which should prop up the Direxion Daily Aerospace & Defense 3X Shares ETF (DFEN) even further.

DFEN, which is up 24% for the year, seeks daily investment results equal to 300% of the daily performance of the Dow Jones U.S. Select Aerospace & Defense Index, which attempts to measure the performance of the aerospace and defense industry of the U.S. equity market. Like the rest of Direxion’s roster of leveraged ETFs, DFEN gives traders the ability to:

  • Magnify short-term perspective with daily 3X leverage;
  • Go where there’s opportunity, with bull and bear funds for both sides of the trade; and
  • Stay agile with liquidity to trade through rapidly changing markets.

DFEN Chart

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