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Trump's Sledgehammer Policies Have Ignited Wall Street's Hottest Trade—And It's Not AI

President Donald Trump‘s America First agenda has supercharged investor flows and returns in a sector quietly dominating Wall Street in 2025—and it's not artificial intelligence or the Magnificent Seven.

Industrial stocks are stealing the show. Through July 22, the Industrial Select Sector SPDR Fund (NYSE:XLI) is up 15% year to date, nearly doubling the S&P 500's 8% return and even edging past the red-hot tech sector—a rare feat.

Excluding 2022, industrials had underperformed tech in six of the last seven years. But this year, it's different. And the catalyst might be more political than technical.

Why Defense Stocks Are Exploding

The spark came from Capitol Hill. On July 4, Trump signed the so-called "One Big Beautiful Bill Act," a sweeping $156.2 billion boost to defense spending—the most significant one-year increase in over a decade—at the expense of Medicaid and food assistance programs.

That flood of Pentagon cash has ignited shares of defense companies, making them the biggest force behind industrial sector outperformance.

The iShares U.S. Aerospace ...