Sector Bird’s Eye View: Aerospace & Defense

Table of Contents

 

What is it?

The aerospace & defense Industry serves, as its name suggests, two main markets: aerospace, which largely comprises of the making, selling and servicing of commercial aircraft. And defense, which consists of companies manufacturing military and policing equipment from jets, ships, tanks, and missiles to rifles, bombs and ammunition, surveillance equipment, and uniforms. 

Why is it important?

Aerospace and defense is an important component of most economies, with a larger focus in more developed economies with larger government defense budgets. Growing demand for aviation and international travel has driven an expansion in this sector that will continue to grow in influence as populations expand too. The US spends approximately $600 billion every year on defense, which amounts to almost 54% of all discretionary spending by the government, making it an incredibly important sector. 

Popular Participants

  • Aerospace: Boeing, Airbus, Rolls Royce
  • Defense: Northrop Grumman, Cobham, Raytheon, Lockheed Martin

Popular ETFs

  • iShares US Aerospace & Defense 
  • SPDR S&P Aerospace & Defense
  • Invesco Aerospace & Defense

When does it do well/badly?

On the retail aviation side, its performance is tied closely to the business cycle. This means that in recessionary times or high interest rates, this sector struggles because consumers cannot afford to travel abroad, which slows production of new aircraft and vice versa for an expansionary period. In terms of defense, the sector performs best in times of elevated geopolitical tension as orders for military equipment increase and often spike in response to ad-hoc threats, but suffer in times of peace. 

Why should I invest? 

Aerospace & defense is a growing sector with an ever-present demand as humans advance further and require more effective air travel. Government must also always allocate a portion of their budget to defense spending, which fuels defense companies indefinitely. If you are an avid follower of the news, then investing in response to geopolitical risk events can be an extremely profitable strategy when implemented correctly and with sufficient research.

 

Share:
More Posts
The Crude Oil Bust 🛢

Surging global crude oil prices, driven by factors like OPEC+ production cuts have pushed U.S. West Texas Intermediate futures to over $95 per barrel.

Metaverse Returns 🤖

Meta, led by CEO Mark Zuckerberg, is intensifying its commitment to innovation in the Metaverse through the introduction of the Quest 3 VR headset.

Higher Rate Households 📈

The recent Fed decision to pause rates has left the federal funds rate at its highest level since 2000.

Get your daily Invstr Crunch

Get the market news and updates you need, delivered to your inbox or available on our daily podcast.

Risk Disclosure:

Invstr is not a bank and banking services are provided by Vast Bank, N.A.

Brokerage and Banking services are currently only available to U.S. residents.

Invstr app and web services are provided by Invstr Ltd. Advisory services are provided by Invstr Financial LLC, an investment adviser registered with the Securities Exchange Commission (SEC) details of which can be obtained here. Securities brokerage and custody services are provided by Apex Clearing, a broker dealer registered with the SEC and a member of FINRA and SIPC. There is no bank guarantee on securities and securities may lose value.

Investing involves risk and can lead to losses. Past performance does not guarantee future results.

Invstr app and web services are provided by Invstr Ltd. Invstr+ advisory services are provided by Invstr Financial LLC, an investment adviser registered with the Securities Exchange Commission (SEC). Securities brokerage and custody services are provided by Apex Clearing, a broker dealer registered with the SEC and a member of FINRA and SIPC. There is no bank guarantee on securities and securities may lose value. Vast Bank N.A. a nationally chartered bank and member of the FDIC, provides the banking products, including the products and services related to digital asset accounts. As with any asset, the value of Digital assets can go up or down and there can be a substantial risk that you lose money buying or holding digital assets. You should carefully consider whether trading or holding Digital assets is suitable for you in light of your financial condition. Your digital account does not support wallet to wallet transferring of your digital assets (i.e. cryptocurrencies) outside the platform. Any Digital Assets in your digital asset account are not insured by any government entities, including but not limited to FDIC or SIPC. The Invstr Visa® Debit Card is issued by Vast Bank, N.A. pursuant to a license from Visa U.S.A Inc and may be used everywhere Visa debit cards are accepted. Invstr Ltd, Invstr Financial LLC and Invstr Securities Ltd are subsidiaries of Marketspringpad Holdings (collectively “Invstr”) and Invstr is solely responsible for the application services and website content.

Watchlists provided when users first access the service are not a recommendation to invest. Instead they are provided to help users better navigate the service. Users are free to edit and create their own watchlists. From time to time, Invstr will suggest instruments solely based on an individual’s interest and the interest levels of the Invstr community. The statistical and portfolio builder models generated by Invstr do not reflect actual investment results and are not guarantees of future results. Comments provided by Invstr leaders, influencers or members of the Invstr Community are not recommendations and should not be construed as such. Invstr does not endorse the content or the positions posted by them. Their investment approach, and that of the models provided by Invstr, may be different from yours and may not be appropriate for you.