XAR stock forecast, quote, news & analysis

Key Takeaways

• XAR is an equal-weighted ETF (exchange-traded fund) that tracks the S&P Aerospace & Defense Select Industry Index, holding roughly 50 U.S. aerospace and defense companies.
• The fund has declined about 9% over the past 30 days and roughly 19% over the trailing quarter, reflecting broad-based pressure across the aerospace and defense segment.
• Its equal-weight construction amplifies the influence of mid- and small-cap names, making XAR more sensitive to smaller industrials than market-cap-weighted peers.
• Top holdings, each near 3% of assets, include RTX, Axon Enterprise, Lockheed Martin, General Dynamics, GE Aerospace, and Howmet Aerospace.
• Principal investment themes are defense budget expectations, commercial aerospace aftermarket demand, and the interest-rate sensitivity of industrial valuations.
• For additional detail on this ticker, explore its Price Targets and Forecast pages.
• Investors seeking broader signals can also explore Trending AI Robots.

State Street SPDR S&P Aerospace & Defense ETF (XAR) Overview

The State Street SPDR S&P Aerospace & Defense ETF (XAR) seeks to track the total return of the S&P Aerospace & Defense Select Industry Index before fees and expenses. The fund employs a sampling strategy and is effectively fully invested in the aerospace and defense segment of the U.S. industrials sector, with approximately 50 holdings and roughly $6 billion in assets under management (AUM). Its net expense ratio is 0.35%.

A defining feature of XAR is its equal-weighted, or modified equal-weighted, structure. Rather than concentrating assets in the largest defense primes, the fund spreads weight nearly evenly across its constituents, so each position typically represents roughly 2% to 3% of the portfolio. Recent top holdings include RTX, Axon Enterprise, StandardAero, Hexcel, General Dynamics, HEICO, GE Aerospace, Howmet Aerospace, Lockheed Martin, and Boeing. This structure gives smaller suppliers and mid-cap manufacturers a larger footprint than in cap-weighted funds, meaning XAR's performance is strongly shaped by the broader aerospace and defense supply chain rather than a handful of mega-cap primes.

Industry and Thematic Landscape

The aerospace and defense industry sits at the intersection of government budgets, commercial air travel, and global security policy. Defense primes depend on multi-year procurement cycles and national budget appropriations, while commercial aerospace names are driven by aircraft production rates, airline fleet demand, and the aftermarket for parts and services. Suppliers across the value chain are influenced by raw-material costs, skilled-labor availability, and supply-chain bottlenecks.

The broader macroeconomic environment also matters. Higher interest rates raise the discount rate applied to the long-duration cash flows that characterize many defense contractors, pressuring valuations. Persistent inflation and elevated financing costs can weigh on capital-goods demand and squeeze margins at suppliers. Against this backdrop, the sector has faced a more cautious tape, with investors reassessing growth expectations and the pace of budget expansion.

Performance and Positioning Snapshot

XAR has moved lower in recent weeks, declining approximately 9% over the trailing 30 days and roughly 19% over the trailing quarter. The pullback has been gradual and trend-driven rather than a single-event shock, with the fund giving back much of the gains it registered earlier in the year.

The equal-weight design helps explain the magnitude of the move. Because mid- and small-cap aerospace and defense names carry a larger collective weight than in market-cap funds, XAR is more exposed to the valuation compression and de-risking that tend to hit smaller, higher-multiple industrials first. Commercial aerospace suppliers and newer entrants, which can be more sensitive to financing conditions and delivery timing, have been a meaningful source of the fund's underperformance relative to its cap-weighted peers. Defensive mega-cap primes have held up relatively better, but their smaller footprint in an equal-weight portfolio limits the cushion they provide.

AI Screener

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2026 Outlook and Key Factors to Monitor

Looking ahead, several structural factors are likely to shape XAR. Defense budget negotiations and procurement timelines will remain central, as multi-year appropriations influence revenue visibility for primes and suppliers alike. Commercial aerospace remains a key swing factor, with aircraft delivery rates, aftermarket demand, and airline capital expenditure determining the earnings trajectory of many holdings.

Interest rates and inflation will also matter. A higher-for-longer rate environment could keep pressure on long-duration valuations, while any easing could support a re-rating of the sector's more growth-oriented names. Supply-chain normalization, labor costs, and the pace of new platform development are additional variables. Because XAR is equal-weighted, investors should monitor the performance of mid-cap suppliers and emerging space and defense entrants as closely as the established primes. These structural drivers, rather than short-term headlines, are likely to define the fund's positioning through 2026.

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