As Expected, This ETF Basks In Trump's Win

Prior to last week's presidential election, there were a small number of industries positioned to benefit regardless of the outcome. On that front, aerospace and defense and infrastructure-related investments grabbed plenty of pre-election press.

Aerospace And Defense

On the campaign trail, President-elect Donald Trump pledged to boost defense spending by $55 billion to $80 billion. Whether or not the Trump administration and Congress can come together on increased defense spending that is anywhere close to the president-elect's objectives remains to be seen, but it is clear that markets like the idea.

On Monday, three of the ETF's hitting all-time highs were aerospace and defense ETFs, a trio including the PowerShares Aerospace & Defense (ETF) PPA. Over the past five trading sessions, PPA has jumped a jaw-dropping 11.2 percent, or more than six times the gain posted by the S&P 500 over the same period.

PPA, which turned 11 years old in late October, tracks the SPADE Defense Index, which “is designed to identify a group of companies involved in the development, manufacturing, operations and support of US defense, homeland security and aerospace operations,” according to PowerShares.

“The National Association of Manufacturers sent a letter to Trump on Wednesday, signed by more than 1,100 business leaders citing 'an urgent need to restore faith in our vital economic and government institutions,'” reported Reuters.

Among those signing that letter were CEOs of major aerospace firms, including Dow component Boeing Co BA, Honeywell International Inc. HON and Lockheed Martin Corporation LMT.

Those three stocks are three of PPA's top five holdings, combining for 20.1 percent of the ETF's weight.

Defense And Politics

Given the always partisan environment on Capitol Hill, some investors are apt to believe the performance of defense stocks and ETFs is intimately correlated to which party occupies the White House. While defense spending fell for several years leading up to 2015, it is worth noting that from 2009, the year President Obama took office, through 2015, PPA outperformed traditional, diversified industrial ETFs in all but two years.

Data suggest investors are betting Trump will be good for aerospace and defense equities. PPA is home to $337.3 million in assets under management, of which nearly 10 percent has flowed into the ETF in just the past five days, according to PowerShares data.