The Industrial Select Sector SPDR Fund (XLI) closed Monday at $172.40, a fresh all-time high, with year-to-date gains of 14.8%. The sector is now outperforming the S&P 500 by 1,060 basis points YTD and is on pace for its best calendar-year performance since 2013. Three principal tailwinds underpin the move: defense, infrastructure, and AI-power buildout.
The Trump administration's FY2026 defense authorization, signed into law in March, totaled $1.04 trillion when including Department of Energy nuclear modernization line items. The Iran-war supplemental added an incremental $164 billion in March, of which roughly 38% is directed at munitions replenishment, 22% at air-defense buildout, 18% at long-range strike, and 22% at logistics and shipbuilding. The bipartisan infrastructure-2.0 package, signed in February, authorized $612 billion of incremental spend over five years, weighted toward grid, water, and ports.
Defense Names Lead
Lockheed Martin (LMT) is up 18%, Northrop Grumman (NOC) up 22%, General Dynamics (GD) up 17%, L3Harris (LHX) up 24%, RTX Corp (RTX) up 14%, and Boeing (BA) up 6% YTD. Munitions specialists Hexcel (HXL), TransDigm (TDG) and Triumph Group (TGI) are up between 17% and 31%. The iShares U.S. Aerospace & Defense ETF (ITA) has gained 21% YTD.
In the broader industrial space, GE Vernova (GEV) leads at +76% YTD, supported by data-center power demand. Caterpillar (