My 3 Top ETFs For The Coming US Defense Spending Supercycle

The US Department of War rules the skies. This aerial military supremacy has enforced the Trump Doctrine that has ended 8 international wars and kept US military casualties at zero. Some examples of this military include:

• Yemen: Operation Rough Rider: President Trump ordered an air and naval campaign against Houthi rebels attacking commercial and naval vessels in the Red Sea and Gulf of Aden. By taking out Houthi air defense, radar and launch capabilities, the Houthis agreed to a ceasefire in May, 2025.
• Iran: Operation Midnight Hammer: Considered “impossible” by tactical strategist experts, Operation Midnight Hammer decimated Iran’s nuclear weapons capability with a surgical attack by B-2 Stealth Bombers and Ohio Class submarine cruise missiles in June, 2025. This led to Iran’s ceasefire of its 12-Day War with Israel and established the deterrent intimidation factor that has enforced The Trump Doctrine.
• Nigeria: Christmas Day Strike On ISIS: After repeated warnings, President Trump greenlit an attack on December 25th, against ISIS militants in Sokoto State who have been committing genocide against Nigerian Christians throughout the year. This strike was conducted in coordination with the Nigerian government. 

President Trump and Secretary of War Hegseth have spoken repeatedly about the need to upgrade the US military’s equipment, and allocations of as high as $1 trillion have been estimated to maintain technical and tactical superiority against US adversaries. With military contract bids already triggering gains for defense industry companies, 2026 looks to escalate things further to ensure The Trump Doctrine peace initiatives continue. Aerospace and Defense ETFs should benefit handsomely from these contract awards to add to their 2025 gains in 2026 and beyond, and the rest of the industrialized world is also picking up the slack in NATO.  Three ETFs that bear watching include:

• Direxion Daily Aerospace & Defense Bull 3X Shares ETF (NYSE: DFEN)
• ARK Space & Defense Innovation ETF (CBOE: ARKX)
• Select STOXX Europe Aerospace & Defense ETF (CBOE: EUAD)

Direxion Daily Aerospace & Defense Bull 3X Shares ETF

GE Aerospace jet engines are crucial for today’s military and commercial aviation needs.

As one might gather from its name, DFEN seeks to return 300% of its benchmark index, the Dow Jones US Select Aerospace & Defense Index, on a single day-to-day basis. As a leveraged ETF, DFEN uses leverage via options, swaps, or futures to achieve this goal. So far, the methodology has worked: DFEN is notching a +178.89% YTD return as of the time of this writing. Launching on May 3rd, 2017, a $10,000 investment made on that date would be worth $36,732 today. 

The top 8 holdings of DFEN are:

• GE Aerospace: 21.55%
• RTX Corp:16.12%
• Boeing: 8.03%
• Howmet Aerospace: 4.60%
• General Dynamics: 3.19%
• Transdigm Group: 3.19%
• L3Harris Technologies: 3.05%
• Lockheed Martin: 2.98%

ARK Space & Defense Innovation ETF

L3Harris Technologies are essential for tactical communication systems and other electronic equipment.

When it comes to technology, controversial portfolio manager Cathie Wood has an impressive, albeit erratic, track record. However, her picks in AI, biotech, robotics and cutting edge digital technologies have largely fueled her success history. The ARK Space & Defense Fund covers companies in the named sectors, which often crossover, especially in the aerospace and outer space arenas. Making its debut on March 30, 2021, ARKX has generated a +53.89% YTD return. A $10,000 investment in ARKX at inception would be worth $14,565 today. Like the vast majority of her ARK ETFs, the portfolio of ARKX does not follow any specific index and is guided by Wood’s gut instincts, according to her fans, or whims, as described by her detractors. 

ARKX’s top 10 holdings are:

• Rocket Lab: 9.50%
• L3Harris Technologies: 8.17%
• Kratos Defense & Security: 7.88%
• Teradyne: 7.14%
• Aerovironment: 6.85%
• Archer Aviation: 5.30%
• Deere & Co.: 5.12%
• Palantir Technologies: 4.57%
• Trimble: 4.07%
• Advanced Micro Devices: 4.03%

Select STOXX Europe Aerospace & Defense ETF

Airbus Group’s military aircraft business warrants the company’s inclusion in EUAD’s portfolio at #1.

One of the more controversial geopolitical policies of the Trump Administration has been its attitude towards NATO. Since its inception, many European nations have often shirked their financial and strategic responsibilities towards NATO, relying on the US to pick up their slack. Thanks to President Trump, he has given an ultimatum to European nations: pay their fare share or risk US disengagement from NATO, which would leave Western Europe to handle Russia on its own. As a result, European defense spending has increased significantly.

EUAD, with an inception date of October 22, 2024, is an ETF organized in response to this initiative. It invests in ADRs of European companies with at least 50% of their revenues derived from the defense sector. This can take the form of hardware equipment, software, electronics, components, support services, or other related areas. So far in its 15 months of existence, EUAD has delivered a +74.80% YTD return. Its other details include:

The top 10 holdings of EUAD are:

• Airbus Group: 19.06%
• Rolls-Royce Holdings: 18.36%
• Safran SA: 18.24% 
• Rheinmetall AG: 11.25%
• BAE Systems PLC: 9.78%
• Leonardo SpA: 6.05%
• Saab AB: 5.17%
• Thales SA: 4.73%
• MTU Aero Engines: 3.75%
• Hensoldt AG: 1.78%