A Tiny Defense ETF Just Smashed The S&P 500 By Nearly 30% | PPA VOO

"The Invesco Aerospace & Defense ETF (NYSEARCA:PPA) has crushed the broader market over the past year, delivering 44% returns compared to the S&P 500's 16% gain. This outperformance stems from concentrated exposure to defense contractors that benefit when military budgets expand and geopolitical tensions rise. The trend has accelerated recently as defense spending proposals gain momentum in Washington."

"President Trump's proposal for a $1.5 trillion defense budget in 2027 would represent a massive 66% increase from current spending levels. This policy shift has ignited a rally across the fund's major holdings, with defense contractors pricing in larger contract awards and improved revenue visibility. The fund's concentrated portfolio structure means these gains flow directly through to overall performance. Other major holdings include Lockheed Martin (NYSE:LMT), Northrop Grumman (NYSE:NOC), and RTX (NYSE:RTX), which have also posted strong gains."

"Defense spending trends matter more than anything else for this fund. When governments allocate more money to military budgets, contractors get larger orders and higher revenue visibility. The macro driver to watch is legislative action on U.S. defense appropriations, particularly the fiscal 2027 budget cycle currently taking shape in Congress. Track the annual National Defense Authorization Act process, which typically moves through committee markups in spring and floor votes by summer. The White House Office of Management and Budget releases detailed budget requests in February or March, showing exactly which programs are getting funded and by how much. European defense spending is also accelerating, with NATO members increasing budgets in response to ongoing tensions with Russia."

The Invesco Aerospace & Defense ETF (PPA) returned 44% over the past year versus the S&P 500's 16% gain. Concentrated exposure to major defense contractors amplified returns as governments increase military budgets and geopolitical tensions rise. President Trump's proposed $1.5 trillion defense budget for 2027 would equal a 66% increase from current spending levels, prompting rallies in holdings expecting larger contract awards and improved revenue visibility. Major holdings include Lockheed Martin, Northrop Grumman, and RTX. Congressional action on fiscal 2027 defense appropriations and the National Defense Authorization Act will determine funding flows. NATO members are also boosting European defense spending amid tensions with Russia.

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