U.S. v. China: Three Potentially Explosive Ideas to Consider

by | Apr 10, 2023 | Markets

Tensions with China are boiling over – and fast.

All after a U.S. Navy destroyer passed through the South China Sea in a show of force, according to Bloomberg. In fact, according to U.S. 7th Fleet Public Affairs, “These operations demonstrate that the United States will fly, sail, and operate wherever international law allows –regardless of the location of excessive maritime claims and regardless of current events.”

In addition, Republican Mike Gallagher, chairman of the U.S. House Select Committee on China, said the U.S. is also working to shore Taiwan’s defenses, and is encouraging Congress to speed up military aid to the island.

Unfortunately, that’s only stoking China, which said it’s “ready to fight,” as noted by the Associated Press. Even worse, Chinese leader Xi Jinping says he is preparing for war. At the annual meeting of China’s parliament, he told his generals to “dare to fight.” He also announced a 7.2% increase in China’s defense budget.

That being said – some of the top ETFs running on fears of war are – yep—defense related.

Invesco Aerospace & Defense ETF (PPA)

One of the best ways to diversify with defense stocks is with an ETF like the Invesco Aerospace & Defense ETF (PPA) – especially with escalating geopolitical tensions.

With an expense ratio of 0.58%, the PPA ETF offers exposure to companies involved in the development, manufacturing, operations and support of US defense, homeland security and aerospace operations. Some of its top holdings include Lockheed Martin, Boeing, Raytheon Technologies, Honeywell, General Dynamics, L3 Harris Technologies, and Textron.

iShares U.S. Aerospace & Defense ETF (ITA)

With an expense ratio of 0.39%, the iShares U.S. Aerospace & Defense ETF (ITA) provides exposure to companies that manufacture commercial and military aircrafts and other defense equipment, according to BlackRock. Some of its top holdings include Raytheon Technologies (RTX), Boeing (BA), Lockheed Martin (LMT), L3 Harris Technologies (LHX), and General Dynamics (GD), for example.

SPDR S&P Aerospace & Defense ETF (XAR)

With an expense ratio of 0.35%, the SPDR S&P Aerospace & Defense ETF (XAR) provides investment results that correspond generally to the total return performance of the S&P Aerospace & Defense Select IndustryIndex. It has holdings in Axon Enterprise Inc., Textron Inc., and Orbital ATK Inc. for example.