European nations are recognizing they need to commit more capital to defense. Therefore, related spending is surging around the world. It reached a staggering $2.7 trillion in 2024. That marks a more than 9% year-over-year increase.
Ongoing increases to defense budgets, particularly when global in scale, is a theme that both long-term investors and risk-tolerant short-term traders can tap into with ease. That is because of exchange traded funds. For those in the latter camp, Direxion has several relevant ETFs to consider. One is the Direxion Daily Aerospace & Defense Bull 3X Shares ETF (DFEN ).
The fund turned eight years old in May. It aims to deliver 300% of the daily performance of the Dow Jones U.S. Select Aerospace & Defense Index. A pair of Direxion single-stock ETFs also merit consideration. Those are the newly minted Direxion Daily LMT Bull 2X ETF (LMTL ) and the Direxion Daily PLTR Bull 2X Shares (PLTU ). The former is a double-leveraged play on Lockheed Martin’s (LMT) daily price action. The latter attempts to do the same with shares of Palantir (PLTR).
Catalysts Abound for Geared Defense ETFs
An array of data points augur well for ETFs such as DFEN, LMTL and PLTU. This includes the point that defense spending far outpaces AI expenditures in the U.S.
“To put in context the relevance of defense as a theme, we compare it to another top-of-mind theme: A.I.,” according to BlackRock. “US defense spending comprises ~3.5% of US [GDP. It] is anticipated that it will reach 5% by 2035. Investment in A.I.-related construction including data centers, electric power utilities, and computer manufacturing sites, is less than 1% of [GDP. It] has already doubled since 2018.”
Geopolitical fragmentation, as noted by BlackRock, is also supportive of rising defense spending. That’s being confirmed in real time. This is because European countries commit more to defense spending in the wake of Russia’s 2022 invasion of Ukraine.
“The significant and steady rise in defense spending—driven by geopolitical fragmentation—is a structural theme that we believe will influence financial markets for the foreseeable future, outperforming global equities over time,” added the asset manager.
That’s not an invitation to hold DFEN, LMTL or PLTU for extended time frames, but it is clear as global defense budgets continue rising, traders who are willing to do some homework could be rewarded by the aforementioned Direxion ETFs. That’s because there will be plenty of times to deploy those funds for short-term purposes.
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