"Defense was the standout theme of 2025, with a narrow trio of U.S.-listed funds absorbing the bulk of the trade, reflecting significant market interest."
"From January 2, 2025 through May 4, 2026, ITA returned 48.99%, while XAR posted a 44.35% one-year gain, showcasing the strong performance of defense ETFs."
"ITA is market-cap weighted, concentrating exposure in prime contractors, while XAR's modified equal-weight construction lifted weight toward smaller suppliers, leading to its superior performance."
In 2025, defense-themed ETFs, particularly iShares U.S. Aerospace & Defense ETF, SPDR S&P Aerospace & Defense ETF, and Invesco Aerospace & Defense ETF, saw substantial inflows. This was attributed to rising European military spending and geopolitical tensions. Performance varied, with ITA returning 48.99% and XAR 44.35%. The report indicates resilience themes for 2026, including cyber and defense. The funds differ in construction, with ITA being market-cap weighted, XAR using modified equal-weight, and PPA offering a broader basket of investments.
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