State Street® SPDR® S&P® Aerospace & Defense ETF [XAR]
By: Ted Black, CFP®
Fall 2026 (Vol. 44, No. 3)
As its name implies, State Street® SPDR® S&P® Aerospace & Defense ETF is a sector fund focused on investing in publicly traded companies within the Aerospace & Defense industries. XAR was launched in the fall of 2011 and currently has roughly $5.5 billion under management. This is a passive ETF, meaning that it's designed to closely match the individual holdings in the same weighting as the S&P® Aerospace & Defense Index. XAR holds about 50 companies that build U.S. military aircraft, ships, missiles, and many of the parts inside them. Each company gets about the same weight, so a smaller parts maker is not drowned out by a giant. Its largest and most well-known holdings include the likes of Lockheed Martin, Northrop Grumman, RTX Corp., General Dynamics, Boeing, and GE Aerospace. However, XAR is not only a defense fund. Much of it is commercial flying: jet engines, spare parts, and passenger planes. That is why companies like GE Aerospace also receive a fair weighting.
America has used up many of the high-end weapons it counts on most and replacing them will take some time. The drain has been years in the making. The United States sent large quantities of arms to Ukraine after Russia's full-scale invasion and fi red costly air-defense missiles while helping protect Israel. This year the war with Iran burned through still more. And these efforts are ongoing.
What is scarce is not ordinary ammunition. It is interceptors, which knock incoming missiles out of the sky, and long-range strike weapons. The shortage runs through the supply chain too: motors, specialty metals, and explosives.
The Congressional Budget Office has suggested that since June 2025, U.S. forces used half to two-thirds of their missile-defense interceptors. Unfortunately, these depleted stockpiles won't be replaced overnight. It can take years to complete orders for crucial items such as Patriot missiles and Tomahawk cruise missiles. One thing seems certain: the U.S. needs to rebuild its stockpiles of the crucial gear that our troops depend upon.
This fund has had particularly strong performance over the past few years, but its upward trajectory stalled in 2026, perhaps creating a buying opportunity. As of mid-October, the fund is down roughly 6.8% year-to-date and stands about 24% below its recent peak. If you believe that the powers that be in Washington D.C. take this issue seriously and are willing to do something about it, this fund may be a worthy addition to your portfolio.
Please keep in mind that as a sector fund XAR may be more volatile than the overall stock market. As such, it's important to consider what percentage of your portfolio to expose to this, or any sector fund.
Performance annualized and updated through 09/30/2026:
1-Year: -1.59%; 3-Year: +27.89%; 5-Year: +14.70%.
The gross annual expense ratio is 0.35%.
If you're interested in this fund, or would like a portfolio review to determine if this fund might be an appropriate addition to your portfolio, please call Ted Black, CFP® at 888-878-0001, extension 3.
--------------------------------------------------Statistics and information provided by Morningstar and State Street Investment Management. Please visit the State Street Investment Management website at www.ssga.com for the most recent performance information. The principal value and investment return will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Returns shown, unless otherwise indicated, are total returns, including any capital gains or losses and all dividend and capital gains distributions. The performance data quoted represents past performance and in no way guarantees future results. Mutual funds and ETFs are not FDIC insured.
Mutual funds and ETFs are sold by prospectus. An investor should consider the investment objectives, risks, charges and expenses of the investment company carefully before investing. The prospectus contains this and other information about the investment company. Please go to www.ssga.com or contact our office at 888-878-0001 to obtain a prospectus. Please read the prospectus carefully before you invest or send money. Advisory services offered through Royal Palm Investment Advisors, Inc., a Registered Investment Advisor.
Advisory services offered through Royal Palm Investment Advisors, Inc., a Registered Investment Advisor.