Forget Tech—Trump Just Made Defense The Hottest Trade On Wall Street

While investors obsess over record highs in the S&P 500 and Nasdaq 100, one sector quietly crushed them both last quarter, and real money is pouring in fast.

In the first half of 2025, the iShares U.S. Aerospace & Defense ETF (NYSE:ITA) surged 25%, marking the fund's best half-year performance since inception. That's a 20 percentage point outperformance over the Vanguard S&P 500 ETF (NYSE:VOO) and 17 points above the tech-heavy Invesco QQQ Trust (NASDAQ:QQQ).

Defense Stocks Crushed Tech In Last Quarter's Rally

But the blowout mainly occurred in the second quarter. The ITA ETF surged 23.2% between April and June, its best quarter ever, outpacing the Nasdaq 100's sharpest rally since early 2023 by five percentage points.

Crucially, this isn't just momentum chasing. Investors have committed capital, with ITA notching 10 straight weeks of inflows through July 10—the longest stretch since early 2023.

Best Defense Stocks In 2025

Among ITA's top holdings, nine of the top 10 are firmly in the green for the year as of July 10, with only Lockheed Martin Corp. (NYSE:LMT) trailing. Here’s a look at how the biggest names are performing:

Name	Weight in ITA ETF	Return YTD
General Electric Company (NYSE:GE)	20.00%	+50.59%
RTX Corporation (NYSE:RTX)	14.70%	+27.61%
The Boeing Company (NYSE:BA)	9.22%	+28.02%
General Dynamics Corporation (NYSE:GD)	4.66%	+15.67%
TransDigm Group Incorporated (NYSE:TDG)	4.63%	+20.45%
Howmet Aerospace Inc. (NYSE:HWM)	4.55%	+66.11%
L3Harris Technologies Inc. (NYSE:LHX)	4.51%	+24.48%
Northrop Grumman Corporation (NYSE:NOC)	4.47%	+9.24%
Axon Enterprise Inc. (NASDAQ:AXON)	4.40%	+35.59%
Lockheed Martin Corporation (NYSE:LMT)	4.39%	-3.34%

Why Is The Defense Sector Booming?

This rally in defense stocks isn’t just about earnings—it's about Washington policy, global geopolitical risks, and budget flows.

Following years of underinvestment, Trump's return to the White House has kicked off a rearmament cycle.

On July 4, Trump signed the "One Big Beautiful Bill Act", unlocking $156.2 billion in targeted defense funding—the Pentagon's biggest budget infusion in over a decade.

What's Inside The New Defense Bill?

The funding, detailed in Title II of the act, includes:

• $29.2 billion for shipbuilding
• $24.4 billion for integrated air and missile defense – the "Golden Dome" initiative
• $25.4 billion for munitions and supply chain resilience
• $16.0 billion for low-cost weapons scaling
• $8.6 billion for air superiority projects
• $10.8 billion for nuclear force upgrades

Defense Stocks Wall Street Is Watching Now

In a note shared earlier this week, Goldman Sachs analyst Noah Poponak flagged four defense contractors as top beneficiaries of the Pentagon’s defense spending:

• Huntington Ingalls Industries Inc. (NYSE:HII): Backed by over $5 billion in industrial supply chain funding. Already awarded a $1.3 billion workforce grant.
• L3Harris Technologies Inc.: Poised to win missile propulsion and satellite contracts tied to the Golden Dome program.
• Kratos Defense & Security Solutions Inc. (NASDAQ:KTOS): Builds low-cost drones and propulsion systems, a core focus in the Pentagon's push for affordable mass-produced systems. Shares of KTOS have already rallied over 70% year-to-date, marking the best performance in the ITA ETF.
• AeroVironment Inc. (NASDAQ:AVAV): Developer of Switchblade tactical drones, a likely beneficiary of $1.4 billion in small unmanned aerial systems funding.

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