From Washington to Warsaw to Tokyo, governments are accelerating long-term investments in military modernization. Plus, the defense sector has historically shown resilience in an uncertain market environment. Here are four reasons to consider portfolio exposure to US defense companies.
1. Consistent government spending
Defense budgets are among the most stable line items in federal appropriations. US military expenditures have remained steady at 3.4% of GDP.1 The current version of President Trump’s “big beautiful bill” includes increased funding for shipbuilding and navel expansion, allocations to enhance missile defense systems, and investments to bolster cybersecurity and operational efficiency.
2. Global demand
US defense contractors are major exporters and may benefit from allies such as Germany, the UK, and Japan increasing procurement amid rising global tensions. NATO called for European member states to increase their defense spending target to 5% of GDP and boost ground-based air defense by 5x in response to Russian aggression.2
3. Innovation-driven growth
Companies in this space, such L3Harris, RTX, Lockheed Martin, and Palantir, are leading in AI, autonomous systems, and space defense technologies.3
4. Low correlation to broader markets
Defense stocks often outperformed during periods of geopolitical stress, largely because of long-term government contracts.4
PPA, Invesco Aerospace & Defense ETF
A US defense ETF, like PPA, offers exposure to companies vital to national security and that are also positioned for structural growth. PPA tracks the Spade Defense Index, a modified market cap-weighted index comprised of publicly traded companies that benchmark the performance of firms systematically important to defense and national security.
