One ETF is teaching investors a hard lesson: Political gain can very quickly turn to political pain.
The $5.7 billion iShares U.S. Aerospace & Defense ETF (ITA) slumped 2.6% in premarket trading as the industry found itself in the crosshairs of tit-for-tat tariffs between the U.S. and China. The fund had added as much as that on March 23 after President Trump tapped John Bolton, an outspoken Iran hard-liner, as his national security adviser.
Much of the slump came from a tumble of more than 4% in premarket trading by Boeing, which accounts for more than 10% of the ETF’s holdings. United Technologies, the fund’s second-largest component and a producer of aircraft engines, tumbled as much as 3.8% before the open.
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“Boeing jet exports are in danger,” Chris Rupkey, chief financial economist at MUFG Union Bank in New York, said in an emailed note. “The same Boeing that added more than any other of the 30 Dow Industrial companies the last six months to the stock market rally.”
While outpacing the S&P 500, the price tag is higher — the average expense ratio is more than 1%.
The SPDR S&P Aerospace & Defense ETF (XAR), which also temporarily advanced on Bolton’s appointment, was little changed before the open. Its exposure to Boeing is far less concentrated, accounting for roughly 3% of the portfolio.
