Defense stocks have been rising with escalation of tensions between the US and North Korea, while the broader stock rally has stalled. Raytheon (RTN - Free Report), Lockheed Martin (LMT - Free Report) and Northrop Grumman (NOC - Free Report) hit record highs after President warned North Korea against making any more threats to the US.

Trump said North Korea faces ‘fire and fury like the world has never seen before” and the rogue nation responded by threatening to launch a missile strike on Guam.

The sentiment for Aerospace & Defense stocks improves with rising geopolitical tensions. They surged after US missile strikes on Syria.  And, that is one of main reasons why these stocks performed well in the last few years, despite defense budget cuts in the US and Europe.

Many developing countries including India, UAE, Saudi Arabia and Brazil have increased their defense spending over the past few years. Of late, Japan and South Korea have also boosted their defense spending in response to increased military spending by China. Trump’s budget proposals call for a boost in US defense spending, which would be positive for these stocks.

Most aerospace & defense companies reported excellent earnings for Q2 and have seen continued positive momentum in earnings estimates. Aerospace & Defense ETFs have significantly outperformed the broader market this year.

To learn more about top ranked Aerospace & Defense ETFs--the iShares U.S. Aerospace & Defense ETF (ITA  - Free Report), the SPDR S&P Aerospace & Defense ETF (XAR - Free Report) and the PowerShares Aerospace & Defense Portfolio (PPA - Free Report), please watch the short video above.