The iShares U.S. Aerospace & Defense ETF (ITA) and its peers are experiencing their longest losing streak on record, falling for six consecutive weeks as of late September 2026. The State Street SPDR S&P Aerospace & Defense ETF (XAR) is on the verge of extending that streak to seven weeks, a feat not seen since the fund's inception in 2011. Prior to this period, the longest weekly losing streak for XAR was five weeks.
The decline has erased the sector's gains for the year. XAR closed at a record high of $296.73 on Aug. 14, but has since dropped 21% to sit 2.9% year-to-date. In contrast, the broader S&P 500 is up 12.3% over the same timeframe. The first week of the decline was particularly severe, with XAR losing 8.1% in the week of Aug. 17, its steepest weekly drop since April 2025.
The selling pressure has been broad, with 42 of the 50 stocks in the XAR portfolio falling during September. Defense-tech companies have been hit the hardest, including Axon Enterprise, which fell 25%, and drone maker Red Cat Holdings, which dropped 24.3%. Major contractors also saw declines, with Huntington Ingalls Industries down 11.7%, Boeing down 11.3%, and RTX Corp down 9.7%. Only eight holdings finished the month higher, led by space companies like Satellogic and Rocket Lab.
Analysts cite stalled budget talks and geopolitical developments as key factors. Reports that Iran offered to reopen the Strait of Hormuz and President Donald Trump raised the prospect of a negotiated end to the conflict have weighed on the sector. Bernstein analyst Douglas Harned noted that the defense sector is currently trading at a 12% discount to the S&P 500, down from a 15% premium in February. Harned anticipates little urgency to buy U.S. defense stocks before the November 3 elections, though he expects the 2027 investment budget to rise by more than 10%.
