$10B Trump-NATO Deal Puts Defense ETFs in Focus
- Global defense ETF SHLD leads with 64% yearly gains amid the weapons sales boom.
- European aerospace fund EUAD posts 79.4% returns on NATO's spending surge.
- U.S. defense tracker ITA attracted $724.5M in quarterly flows during escalation.
Defense exchange-traded funds tracking global, European and U.S. markets are experiencing their strongest performance in years and hovering near all-time highs as President Donald Trump's $10 billion weapons deal with NATO allies drives unprecedented investor interest in military technology stocks.
The announcement Monday that the U.S. will sell weapons to European allies for transfer to Ukraine has created a windfall for defense-focused ETFs tracking companies positioned to benefit from increased military spending. The Global X Defense Tech ETF (SHLD) has posted year-to-date returns of 64%, while the Select STOXX Europe Aerospace & Defense ETF (EUAD) has surged 79.4% this year, according to FactSet.
Trump's policy shift from the previous administration's approach of donating weapons to selling them through NATO partners represents a fundamental change that could reshape defense industry dynamics. The deal includes missiles, air defense systems and artillery shells, with deliveries expected within days, according to reporting from The Wall Street Journal and Axios.
The surge in defense ETF performance reflects investor confidence that escalating geopolitical tensions and Trump's 50-day ultimatum to Russia will drive sustained government spending on military technology, creating long-term opportunities for companies specializing in advanced defense systems.
Global Defense ETFs SHLD & EUAD Lead Rally
SHLD, managed by Global X, has attracted $1.8 billion in net flows year to date, with $513.8 million flowing in during the past month alone, according to FactSet. The fund tracks the top 50 pure-play defense technology companies globally, with holdings weighted by market capitalization and capped at 8% per security.
The fund's top holdings include Rheinmetall at 8.5%, Palantir Technologies Inc. (PLTR) at 8.1% and RTX Corp. (RTX) at 7.8%, according to FactSet data. These companies provide the cybersecurity, artificial intelligence and advanced military systems that governments increasingly rely on for threat preparedness.
Key Metrics for Top Defense ETFs
Fund | |||
Issuer | Global X | Tuttle Capital Management LLC | BlackRock, Inc. |
AUM | $3.1B | $1.1B | $8.5B |
Expense Ratio | 0.5% | 0.5% | 0.4% |
One-Month Net Flows | $519M | $157.8M | $293.6M |
Three-Month Net Flows | $1.2B | $449.9M | $724.5M |
Year-to-Date Net Flows | $1.8B | $951.2M | $451.7M |
Source: etf.com & FactSet Data as of July 16, 2025
EUAD, issued by Tuttle Capital Management, focuses specifically on European aerospace and defense companies that derive at least 50% of revenue from the sector. The fund has generated three-month returns of 29.8% and attracted $449.9 million in quarterly net flows, according to FactSet.
The European fund's largest holding is Airbus at 22.2%, followed by Safran at 15.7% and Rheinmetall at 14.7%, according to FactSet. The concentration in European companies positions the fund to benefit directly from NATO's increased defense spending commitments.
Trump Policy Drives Defense Spending
The iShares U.S. Aerospace & Defense ETF (ITA), managed by BlackRock, Inc. (BLK), has posted more modest but still strong year-to-date gains of 33.6%. The fund attracted $293.6 million in monthly net flows and $724.5 million over three months, according to FactSet data.
ITA's largest holding is GE Aerospace (GE) at 20.4%, followed by RTX Corp. at 14.7% and Boeing Co. (BA) at 9.4%, according to FactSet. The fund tracks U.S. manufacturers, assemblers and distributors of aircraft and defense equipment, with quarterly rebalancing to maintain diversification.
Trump's announcement that he will impose "very severe tariffs" on countries trading with Russia if no peace deal emerges within 50 days adds another layer of potential benefit for defense contractors. Commerce Secretary Howard Lutnick indicated Trump could choose between tariffs or sanctions on countries doing business with Russia, according to Wall Street Journal reporting.
The weapons package reportedly includes Patriot missile defense systems from European countries, with the U.S. replenishing supplies for donor nations. Germany, Finland, Denmark, Sweden, Norway and the Netherlands were identified as potential first-wave contributors, according to Axios reporting.
NATO Secretary General Mark Rutte said Ukraine would receive "a massive supply of weapons" under the arrangement, with European countries footing the bill for U.S.-manufactured equipment, according to Axios reporting. This model could establish a sustained revenue stream for defense manufacturers as geopolitical tensions persist.
Editor's note: This article has been updated to reflect that SHLD is managed by Global X.
