Defense contractors, defense technology and the industrial companies around them, paid from government budgets.
The defense trade is one of 22 market stories StoryVector measures. 67 US ETFs carry it, with $79 billion between them; the largest holder, XLI, holds 38.8% of its capital. This week it ranks 12th of 22 for attention, in the WARM band. Over the past year its ETFs returned +5.2%, against +16.8% for broad US ETFs, to October 2, 2026; past performance, not a recommendation.
Its level among all 22 on the fixed 25 to 60 scale. The band is where the level sits this week, not a direction.
Its ETFs ranked among the narratives, lowest to highest. The white notch is this one; the thin tick is where broad US ETFs would sit. Measured and past, not a forecast.
What the story is about, where its attention comes from, what sets it off, and what it shares ETFs with.
Governments are spending more on defense. Is that a lasting new budget, or a response to current wars?
A lasting step up in defense budgets across the US, Europe and Asia, locked in by treaties and multi-year contracts and outlasting any one war.
Spending and attention tied to the conflicts under way now. When those wars end, the extra spending ends with them.
What would separate them. Where the money is committed. Budgets written into law and multi-year contracts fit the first reading. Emergency spending and replacing what a war used up fit the second.
Broad industrial ETFs hold the largest share of the capital here, and most of what they own is not defense. We measure the attention and the capital, not what governments will spend.
67 ETFs carry this narrative; 59 have it as their main one. Here is how its capital divides among them.
The asset-weighted return of the unlevered ETFs that carry this narrative, against broad US ETFs. Measured and past, not a forecast.
| 1M | 3M | YTD | 1Y | 3Y* | 5Y* | |
|---|---|---|---|---|---|---|
| The defense tradeits ETFs, unlevered | −3.2% | −10.2% | +4.9% | +5.2% | +24.3% | +14.7% |
| rank among the narratives | 15th of 22 | 22nd of 22 | 14th of 22 | 13th of 21 | 8th of 21 | 4th of 21 |
| The marketbroad US ETFs | +0.8% | +2.6% | +14.6% | +16.8% | +22.9% | +12.9% |
1M, 3M, 1Y, 3Y, 5Y: one month to five years. YTD: year to date. * A year, annualized. Rank is among the narratives with a full record for the period. A dash means the narrative’s ETFs do not cover the whole period.
Total return on the market price, each distribution reinvested on its ex-date. The narrative is the asset-weighted return of the unlevered ETFs that carry it; the market is the asset-weighted return of broad US index ETFs. Past performance is no guarantee of future results.
6 categories, each claimed by a written rule. The bar is each one’s share of the capital. The table names what decides each.
| Category | ETFs | Capital | Share of the ETFs | Share of the capital |
|---|---|---|---|---|
| Broad industrialsBusiness investment and factory activity across the economy, of which defense is one part | 7 | $43.3 bn | 12% | 54.9% |
| Aerospace and defenseGovernment defense budgets and multi-year procurement contracts, and airline orders for commercial aircraft | 10 | $25.8 bn | 17% | 32.7% |
| Defense technologyHow much of defense spending goes to software, drones and surveillance rather than ships, aircraft and vehicles | 9 | $7.0 bn | 15% | 8.9% |
| Defense outside the USEuropean and Asian governments' defense budgets, and their currencies against the dollar | 7 | $1.3 bn | 12% | 1.7% |
| Space and frontiersGovernment and commercial launch and satellite contracts | 3 | $0.9 bn | 5% | 1.2% |
| Levered and inverse wrappersThe day-to-day path of the aerospace and defense index, which a daily reset compounds | 23 | $0.5 bn | 39% | 0.7% |
The widest gap: levered and inverse wrappers, 39% of the ETFs and 0.7% of the capital.
What issuers have listed with this as the main narrative, by wrapper.
What issuers have listed, not what anyone expects. A wrapper can be listed before anyone wants it, so a count of ETFs and a share of capital answer different questions.
67 US ETFs carry it. The largest holders of its capital are XLI (38.8%), ITA (15.8%) and VIS (11.1%).
XLI, with 38.8% of the capital in ETFs carrying the story; the top five hold 82.5%.
Its attention level is 48.6 on a scale of 25 to 60, 12th of 22 this week, in the WARM band. The level averages six channels: search, video, news, forums, investor boards and reference pages.
Asset weighted, its ETFs returned +5.2% over the past year, against +16.8% for broad US ETFs, to October 2, 2026. Past performance only.
Run an ETF in the defense trade? StoryVector shows issuers where their ETFs stand against the closest rivals, every week.
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