Been tracking something interesting in the market lately. Global defense spending just hit an all-time high of $2.72 trillion in 2024—up 9.4% year-over-year, which is the sharpest jump since the Cold War. The U.S. alone accounted for $997 billion, roughly 37% of that total. China, Russia, Germany, and India round out the top five, and honestly, with ongoing geopolitical tensions, this spending doesn't look like it's slowing down anytime soon.

Here's what's caught investor attention: while most S&P 500 sectors have seen earnings estimate pressure lately, the aerospace and defense sector is one of the few actually moving upward. Q1 earnings for aerospace companies grew 23.2% with an 85.7% beat ratio. That kind of momentum doesn't happen by accident.

Europe's also ramping up. Goldman Sachs expects EU defense spending to jump by around €80 billion annually by 2027. Germany's military budget jumped 28% to $88.5 billion last year, becoming the world's fourth-largest spender. Poland hiked its budget 31%, Sweden increased by 34% as a new NATO member. All 32 NATO members raised defense budgets in 2024, with 18 hitting or exceeding the 2% of GDP target. Trump's pushing for 5%, which tells you where this is headed.

With all that capital flowing into military spending, defense and aerospace ETFs have become a natural play for investors looking to capture that trend. The Zacks Aerospace-Defense industry currently ranks in the top 20% of industries, and the broader aerospace sector carries the best Zacks Sector Rank.

If you're looking at defense sector ETFs, here are the main options worth considering. ITA (iShares U.S. Aerospace & Defense ETF) tracks the Dow Jones U.S. Select Aerospace & Defense Index with 40 basis points in fees. PPA (Invesco Aerospace & Defense ETF) holds about 50 U.S. companies focused on defense, military, and space operations—57 bps in fees. XAR (SPDR S&P Aerospace & Defense ETF) gives you the S&P sub-industry index at 35 bps, one of the cheaper options.

For broader exposure, SHLD (Global X Defense Tech ETF) includes defense technology companies globally, with heavy weighting in the U.S. (51.3%), UK (11.8%), and Germany (10%)—50 bps in fees. If you're thinking Europe, EUAD (Select STOXX Europe Aerospace & Defense ETF) tracks European-based aerospace and defense stocks at 50 bps. MISL (First Trust Indxx Aerospace & Defense ETF) focuses on U.S. aerospace and defense sub-themes at 64 bps.

NATO (Themes Transatlantic Defense ETF) is interesting if you want companies across NATO member countries—35 bps. And WAR (U.S. Global Technology and Aerospace & Defense ETF) casts a wider net, including semiconductors, cybersecurity, data centers, and homeland security alongside aerospace and defense—60 bps.

The point is, defense sector ETFs are getting serious attention right now. Whether it's the earnings momentum, geopolitical drivers, or rising government spending commitments, this sector looks positioned for continued investor interest. Worth doing your own research to see which fund structure fits your portfolio.