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    ETFs to Consider Amid Geopolitical Woes and Higher US Military Budget


    Recent U.S. military operations in Venezuela, Trump’s renewed focus on acquiring Greenland, even through military action, and persistent tensions across the Middle East and Asia’s key flashpoints highlight an increasingly fragile and complex geopolitical landscape. This backdrop structurally supports higher defense spending, a shift President Trump recently proposed.

    As quoted on Reuters, President Trump recently proposed a substantially larger U.S. military budget, calling for a $1.5 trillion U.S. military budget in 2027, a sharp increase from the $901 billion approved for this year.

    The proposal helped defense stocks rebound from earlier losses, which followed Trump’s criticism of defense firms for slow weapons production. The president had warned he could block American defense contractors from paying dividends or executing share buybacks until production accelerates. Shares of major U.S. defense companies like Northrop Grumman NOC, Lockheed Martin LMT and RTX Corporation RTX moved higher on Thursday, gaining about 2.39%, 4.34%, and 0.78%, respectively.

    The proposal to increase the military budget, however, hinges on congressional authorization, potentially limiting its path forward. Additionally, the higher spending proposal has sparked renewed budget worries.

    While a higher military budget has raised concerns about added pressure on U.S. debt, already about $38 trillion, as quoted on another Reuters article, Trump argued that the additional spending would be offset by tariff-generated revenues. He maintained that the United States could still reduce its debt burden while distributing dividend checks to moderate-income Americans.

    The S&P 500 Aerospace & Defense Index has gained 59.87% over the past year and 11.59% in January so far, highlighting strong momentum in the sector. The index has significantly outperformed the broader S&P 500, which has risen 16.95% over the past year and 1.11% so far in the month.

    According to Global X, global defense spending is projected to top $3.6 trillion by 2030, marking around 33% rise from the levels seen in 2024. Additionally, stronger fundamentals, supported by higher defense budgets, robust order pipelines and modernization efforts are strengthening the long-term outlook for defense companies.

    In such an environment, investing in Aerospace and Defense ETFs may offer a strategic advantage, as these funds tend to perform well during periods of heightened military activity and increased defense spending.



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