Defense Stocks Enter Bear Market, Hit Longest Losing Streak on Record

The Iran war should have been a tailwind for defense stocks. Instead, the sector is living through the longest losing streak in its history. The State Street SPDR S&P Aerospace & Defense ETF (NYSE: XAR ) has closed lower for six straight weeks. The seventh week is going the same way so far.

3% higher during Tuesday trading. If the week ends in the red, XAR will have fallen for seven weeks in a row. That has never happened since the fund launched in 2011. Before this run, its longest weekly losing streak was five.

S. 6% since Aug. 14. From Record High to Bear Market The slide started at a record.

73 on Aug. 14, up 23% for the year. Today the fund sits 21% below that peak. A drop of 20% from a high is the usual definition of a bear market.

The entire 2026 gain is gone. 9% year to date. 3%. The first week did the most damage.

1% in the week of Aug. 17. That was its steepest weekly drop since the tariff shock of early April 2025. Only Two Streaks Came Close The fund had fallen for five straight weeks only twice before.

The first time was the pandemic crash. From mid-February to mid-March 2020, XAR lost 45% in five weeks as airlines grounded their fleets. The second came in the spring of 2022. 8% over five weeks from mid-April to mid-May, while the whole market fell as the Federal Reserve raised rates.

Both of those streaks came during a broad selloff. This one does not. 4% since Aug. 14.

3% over the six completed weeks. Why Peace Headlines, Budget Talks Hurt Aerospace and defense shares fell broadly on Sept. 22. S.

took initial steps to ease military pressure. On the same day, President Donald Trump raised the prospect of a negotiated end to the conflict at the United Nations. Bernstein’s Douglas Harned sees a different problem. “The budget is stalled,” Harned said in a note reported on Sept.

23. Neither chamber of Congress has approved appropriations bills. In addition, the House is in recess until after the midterm elections. 5 trillion defense budget proposal was in focus, to a 12% discount today.

A stopgap funding bill through Dec. 11 would lock spending at 2026 levels. Harned said that adds risk to tactical missiles and interceptors, where inventories are already low. S.

defense before November,” he said. He added that he sees the Nov. ” Meanwhile, he expects the 2027 investment budget to rise by more than 10%. Read Also: Should You Buy Micron Stock Ahead of Earnings?

Here's What History Says Worst-Performing Defense Stocks in September The selling in September was broad. Of the 50 stocks in XAR’s portfolio, 42 fell during the month. 7%. The biggest losses came from defense-tech companies.

Axon Enterprise Inc. (NASDAQ: AXON ), which makes Taser devices and police body cameras, fell 25%. Drone maker Red Cat Holdings Inc. 3%.

Suppliers were hit hard as well. Carpenter Technology Corp. 1%. Karman Holdings Inc.

8%. The largest contractors did better, but they still lost ground. Huntington Ingalls Industries Inc. 7%, The Boeing Co.

3% and RTX Corp. 7%. Lockheed Martin Corp. 7%.

Only eight holdings finished the month higher, and space companies led that group. Satellogic Inc. 2%, and Rocket Lab Corp. 9%.

Drone And Defense-Tech Names Led The September Losses Company Aug. 31 close Sept. 28 close September change Axon Enterprise Inc. 0% Red Cat Holdings Inc.

3% Carpenter Technology Corp. 1% Karman Holdings Inc. 8% VSE Corp. 3% Kratos Defense & Security Solutions Inc.

6% Aevex Corp. 6% Cadre Holdings Inc. 1% Read Also: Getty Images Has Three Days to Avoid Default as AI Erodes Its Stock-Photo Empire Photo: Shutterstock