The impact of Trump administration policies on ETF investor strategies has been significant, with trade uncertainty and fiscal spending driving record market dispersion and pushing flows towards a historic $1.2 trillion pace. According to CFRA Research’s webinar, titled “Trump 2.0: How the Policy Agenda is Impacting ETF Investors,” the policy agenda under Trump 2.0 has created distinct market phases since the November election. ETF performance has been swinging dramatically around key policy announcements, particularly tariff decisions.
Aniket Ullal, head of ETF research at CFRA Research, highlighted that Trump’s “One Big Beautiful Bill” and evolving trade policy are fundamentally altering how ETF investors approach sector allocation. Defense spending increases and European market dynamics are creating new opportunities, while tariff uncertainty is driving the highest stock dispersion since Covid-19.
Defense ETFs have emerged as clear beneficiaries of increased Pentagon spending, with the iShares U.S. Aerospace & Defense ETF (ITA) gaining 27% year to date. European defense exposure through the Select STOXX Europe Aerospace & Defense ETF (EUAD) surged 72%, driven by NATO pressure on member countries to boost defense budgets.
Ullal noted during the webinar that defense and aerospace ETFs have been amongst the best-performing sectors in 2025. It is essential for ETF investors to conduct thorough holdings analysis, as some defense ETFs include technology exposure to companies like Palantir Technologies Inc. (PLTR), the S&P 500’s best performer this year.
Trade policy uncertainty has driven stock dispersion to levels not seen since the pandemic. Return differentials within retail sectors, such as Dollar General Corp. (DG) and Dollar Tree Inc. (DLTR), have expanded due to varying levels of China exposure.
The dollar weakened 7% against trade-weighted currencies, benefiting exporters and international ETF performance. Developed and emerging markets have outperformed U.S. markets despite limited ETF flows into international strategies.
Deregulatory efforts under Securities and Exchange Commission Chairman Paul Atkins are expected to accelerate ETF launches, with over 60 managers filing for ETF share classes of mutual funds. The crypto ETF ecosystem has expanded to $158 billion in assets across 76 funds, approaching the $178 billion in gold ETF assets.
ETF flows remain on track to exceed 2024’s record $1.2 trillion, driven primarily by retail investors who “bought the dip” during policy-driven volatility. It is evident that Trump administration policies are reshaping ETF investor strategies and driving significant changes in the market landscape.
