Aerospace stocks and exchange traded funds have spent ample time in the spotlight since the November U.S. presidential election. That trend is expected to continue as President Donald Trump addresses Congress for the first time Tuesday.

Although the aerospace and defense industry is perceived as being beholden to Uncle Sams whims, the allure of late-cycle sectors, including industrials, in a rising rate environment remains in place. Industrials perform well when interest rates rise because rising rates can go hand-in-hand with economic growth.

However, the iShares U.S. Aerospace & Defense ETF (NYSEArca: ITA), PowerShares Aerospace & Defense Portfolio (NYSEArca: PPA) and the SPDR S&P Aerospace & Defense ETF (NYSEArca: XAR) were pinched somewhat late last year after Trump criticized the Pentagons profligate spending habits.

Coming one day before delivering his high-stakes State of the Union address on Tuesday to a joint session of Congress, Trump will demand a budget with tens of billions of dollars in reductions to the Environmental Protection Agency and State Department, administration officials reported, reports ETF Daily News.

ITA is a cap-weighted ETF, meaning it has larger weights to big-name defense stocks, including Dow components Boeing (NYSE: BA) and United Technologies (NYSE: UTX). XAR is an equal-weight ETF. PPA holds 50 stocks involved in the development, manufacturing, operations and support of US defense, homeland security and aerospace operations, according to PowerShares.

In addition to political rhetoric, potential catalysts for aerospace ETFs include include, renewed airline pricing power evidenced by higher ticket prices, and more fees paid per traveler, increased airline profitability, new aircraft program launches and continued demand for aircraft models and technology.

Resistance from federal agencies could ease some of the deepest cuts in the initial plan before a final budget request is even sent to Congress. And Capitol Hill will have the last word. To meet Mr. Trumps defense request, lawmakers in both parties would have to agree to raise or end statutory spending caps on defense and domestic programs that were imposed by the 2011 Budget Control Act, according to ETF Daily News.

For more information on the defense industry, visit our aerospace & defense category.

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Aerospace ETFs are Still Trump Trades - ETF Trends