After inflation and rising interest rates caused some penny-pinching in 2022, this year could be different for various sectors, including the aerospace and defense (A&D) sector. Government subsidies, in particular, could give the sector a boost in 2023.
The positive news for traders who are eyeing the defense sector in the U.S. is that the government is ready and willing to allocate funds. According to a Forbes article, the U.S. is top in the world when it comes to defense spending.
“The U.S. government spends far more on defense than any other country, awarding contracts worth hundreds of millions of dollars to American companies that manufacture military technology and equipment,” the article said.
In essence, defense companies don’t have to worry about competing for the market share of various customers. They essentially have one customer, the U.S. government, and it has plenty of spending power on tap.
“Many investors see this as an opportunity to invest in companies with a mostly-guaranteed customer with significant financial resources,” the article added.
Lever Up on Aerospace and Defense
A continuous flow of government funds into the defense sector can open up opportunities in A&D. As such, traders can take advantage of exchange traded funds (ETFs) in the sector.
“For 2023, the proposed budget totals $5.8 trillion. Most of that amount goes toward mandatory programs like Social Security and Medicare. $1.709 trillion is dedicated to discretionary programs,” the Forbes article said. “The proposed budget for defense spending for 2023 is $795 billion, meaning U.S. companies that can provide military technology or equipment have a massive pool of funds to compete for.”
Bold traders looking to add leverage in order to maximize their profit potential can consider the Direxion Daily Aerospace & Defense 3X Shares ETF (DFEN) for their watch lists. DFEN 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.
- Stay agile with liquidity to trade through rapidly changing markets.
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