A government budget that’s friendly toward aerospace and defense (A&D) can prove beneficial to the industry. As such, traders may want to consider the Direxion Daily Aerospace & Defense Bull 3X Shares ETF (DFEN) for their watch lists.
Last year, Russia’s invasion of Ukraine reminded governments around the globe that shoring up its defense sector should remain a priority. The defense bill for fiscal year 2024 saw a 3.6% increase over the previous year. That should help provide funding for research and development.
“Improved budgetary provision offered by the U.S. government, as witnessed from the approved defense bill, is expected to bode well for aerospace-defense companies that are primarily engaged in combat space,” a 24/7 Wall Street article noted. “However, lingering supply-chain challenges might continue to delay deliveries and thereby remain a threat to the industry players. Nevertheless, improved projections for air travel, as stated by the International Air Transport Association (IATA), are expected to bode well for companies that are engaged in commercial aerospace operations.”
Increased Travel Should Help Leveraged ETF DFEN
As of June 30, about 17% of DFEN’s holdings allocated to Boeing stand at about 17%. Therefore, any positive news for its stock should benefit the fund. As air travel is ramping up again in a post-COVID-19 world. As such, the aircraft manufacturer is looking to meet demand with increased supply.
The International Air Transport Association is already seeing increases in air travel, especially this summer. In July 2023, revenue passenger kilometers increased just over 26% versus the previous year.
Overall, it gives the proverbial green light for companies like Boeing to build more planes.
“Boeing plans to push production of its bestselling 737 narrowbody jet to a record of at least 57 per month by July 2025, reflecting rising orders and the company’s recovery after the 737 MAX crisis, according to two sources with knowledge of the matter,” reported Reuters. “The goal would hit the planemaker’s unmet target from several years ago, which was scuttled in 2019 when the MAX was grounded globally following two deadly plane crashes.”
DFEN seeks daily investment results equal to 300% of the daily performance of the Dow Jones U.S. Select Aerospace & Defense Index. The index 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.
- Stay agile with liquidity to trade through rapidly changing markets.
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