Growing geopolitical tensions around the globe should open up potential opportunities for traders, especially when it comes to the defense sector.

“Tensions in areas around the world are beginning to rise. Russia has moved troops to the Ukrainian border and supplied peacekeepers to Kazakhstan,” noted Scott Sacknoff of SPADE indexes. “China and the US appear to be expanding their cold war rhetoric and there are rising concerns that 2022 could be the year that China annexes Taiwan.”

The pandemic also continues to be a wild card, adding to the tensions around the world. That said, military budgets in the U.S. have been stable with a rise in international defense in particular.

“And the stress of pandemic inequalities is seeing increasing unrest in the Middle East as well as social unrest here in the United States,” Sacknoff added further. “This return to fear and uncertainty is a business environment that should directly impact defense firms, translating into a return of the international sales growth that the sector has seen in recent years. The reaction by France to an announced partnership between the US and the United Kingdom with Australia on submarine development highlights just how important international defense sales are to maintaining a healthy industrial base.”

“With stable military budgets in the United States, expanding international defense sales, and a return to an expansion phase for commercial aircraft deliveries, we see 2022 being a great one for defense stocks,” Sacknoff said.

Leveraging the Defense Trade

One way for traders to play the growth in the defensive sector with the potential for amplified gains is the Direxion Daily Aerospace & Defense 3X Shares ETF (DFEN). The fund is up 15% to start 2022 and 30% within the past year.

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.

DFEN Chart

For more news, information, and strategy, visit the Leveraged & Inverse Channel.