Top Ways to Trade the Potential for World War III

Oct 19, 2023
toy tank and dollars, army token. High quality photo

The world may be on the brink of an apocalyptic war.

We have Israel hunting Hamas, with tanks and troops ready to roll through Gaza. Hezbollah says it’s ready to enter the conflict. The U.S. has two warships in the region, and is reportedly sending in troops. Iran says it could launch a preemptive strike.

Worse, according to the New York Post, “Iran’s threats have caused some to become concerned that if Iran escalates the war in Gaza, it could even bring Russia into the conflict — creating a potential Third World War.”

That’s a recipe for a near-term disaster.

Long-term, “There are some things that are changing significantly. One is the global threat environment and the geopolitical situations getting more concerning and challenging,” said Jim Taiclet, president and CEO of Lockheed Martin. “That’s refocusing the US and certainly our allies around the world on national defense in an increasing manner.”

All of the chaos would explain why defense funds are seeing sharp inflows, including:

Invesco Aerospace & Defense ETF (PPA)

With an expense ratio of 0.68%, the PPA ETF offers exposure to companies engaged in operations supporting the US defense, military, homeland security, and space operations. Since the latest war began, the PPA ETF saw inflows of about $48 million in the week ended Oct. 11 after weeks of steady outflows.

U.S. Aerospace & Defense ETF (ITA)

Or, we can look at the ITA ETF, which saw inflows of $7.2 million in the week ended Oct. 11. With an expense ratio of 0.40%, the ETF tracks US-listed manufacturers, assemblers and distributors of aircraft and aircraft parts primarily used in commercial or private air transport and producers of components and equipment for the defense industry.

Direxion Daily Aerospace & Defense Bull 3x Shares (DFEN)

There’s also the DFEN ETF. With an expense ratio of 0.97%, the DFEN ETF seeks daily investment results, before fees and expenses, of 300% of the performance of the Dow Jones U.S. Select Aerospace & Defense Index.