Why defense makes sense

Thematic ETFs are a way for investors to go between and beneath traditional sectors to capture macro trends shaping the markets and economy.  US defense, a theme we highlighted last year too, should remain relevant in 2025 with the evolving market backdrop of a mix of higher interest rates, inflation concerns, and potential changes in trade policies. The defense sector has historically shown resilience in uncertain market environments, largely because of long-term government contracts. Unlike many industries that are highly cyclical and subject to economic growth or consumer demand, defense companies benefit from consistent funding from government budgets regardless of who occupies the House, Senate, or presidency. This often leads to more predictable revenue streams, which has helped defense companies weather economic downturns.  It can also help mitigate political uncertainty, like the possibility of renewed tariffs or new economic policies from the Trump administration.

For example, President Trump’s proposed Department of Government Efficiency or DOGE, is tasked with shrinking the federal government. The Pentagon has requested $850 billion for its 2025 budget, or 3% of GDP.  While there’s currently bipartisan support for defense spending from the Senate, budget cuts are still a possibility. However, because of the backlog from existing contracts, and the need for defense modernization in space, drone warfare, and cybersecurity, it’s unlikely US defense companies will experience meaningful cuts in 2025. Also, any government contract reductions could be offset by corporate tax cuts, another Trump agenda item.

The Invesco Aerospace & Defense ETF, ticker PPA, is a compelling option for investors looking for exposure to US defense. It tracks the SPADE™ Defense Index, which includes companies that are systematically important to the defense sector instead of relying on broad industry categorizations. 

Learn more about PPA and other related ETF insights in the featured products and resources section below the video.

Important information 

Not a Deposit    Not FDIC Insured    Not Guaranteed by the Bank    May Lose Value    Not Insured by any Federal Government Agency

Past performance is not a guarantee of future results. An investment cannot be made into an index.

This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.

The opinions expressed are those of Invesco, are based on current market conditions and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals.

There are risks involved with investing in ETFs, including possible loss of money. Shares are not actively managed and are subject to risks similar to those of stocks, including those regarding short selling and margin maintenance requirements. Ordinary brokerage commissions apply.

The Fund's return may not match the return of the Underlying Index. The Fund is subject to certain other risks. Please see the current prospectus for more information regarding the risk associated with an investment in the Fund.

Investments focused in a particular industry, such as aerospace and defense, are subject to greater risk, and are more greatly impacted by market volatility, than more diversified investments.

Stocks of small and mid-sized companies tend to be more vulnerable to adverse developments, may be more volatile, and may be illiquid or restricted as to resale.

The Fund is non-diversified and may experience greater volatility than a more diversified investment

Shares are not individually redeemable, and owners of the Shares may acquire those Shares from the Fund and tender those Shares for redemption to the Fund in Creation Unit aggregations only, typically consisting of 10,000, 20,000, 25,000, 50,000 , 80,000, 100,000, or 150,000 Shares.

Invesco Distributors, Inc.              02/25                  NA4169894