For the First Time in 57 Years, No Agreement Caps U.S. and Russian Nukes

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The New START treaty expired on Feb 5, 2026. No replacement was signed. No informal extension was agreed. 

For the first time since 1969, when the U.S. and the Soviet Union launched the SALT I negotiations, there is no active treaty capping nuclear arsenals between the world's two largest nuclear powers.

That's a structural shift in global security. And for investors with exposure to defense, aerospace, and geopolitical risk assets, it matters more than most headlines suggest.

Here's what we know and what it signals for markets.

New START, signed in 2010 and extended in 2021, was the last surviving bilateral nuclear arms control agreement between the U.S. and Russia. 

It capped deployed strategic warheads at 1,550 each and deployed delivery systems at 700 each. It also included robust verification, on-site inspections, data exchanges, and a Bilateral Consultative Commission that met twice a year.

The treaty did its job. But it was designed for a different era.

Russia invaded Ukraine in 2022. Inspections halted during COVID and never restarted. In February 2023, Putin suspended Russian compliance outright. By late 2025, both countries had stopped sharing data. The framework that held for 15 years had effectively already collapsed.

The formal expiration on February 5 just made it official.

Without New START, both sides are unconstrained. Here's the current nuclear balance:

That last number is the one the market is watching. China has never been party to an arms control agreement. It's not at the table. And it's moving fast.

Secretary of State Marco Rubio made clear on February 5 that the U.S. won't consider bilateral arms control with Russia unless China is included. Trump posted on social media the same day: "we should have our Nuclear Experts work on a new, improved and modernized Treaty."

That's not a treaty. That's a wish. And in the meantime, all three nuclear powers are modernizing simultaneously.

The Congressional Budget Office estimated in 2025 that U.S. nuclear operations and modernization could cost over $95 billion per year and that figure is set to climb. The U.S. is in the middle of a complete overhaul of its nuclear triad:

Trump's proposed FY2026 defense budget is $1.01 trillion, a 13% increase from the prior year. The administration also announced the "Golden Dome" missile defense initiative, with early cost estimates exceeding $500 billion.

Russia has largely completed its own modernization cycle. Its Avangard hypersonic glide vehicle, specifically designed to evade Western missile defenses, is already deployed. The Burevestnik nuclear-powered cruise missile and Poseidon underwater drone remain in testing. These systems are not covered under any current or expired treaty.

China, meanwhile, launched new DF-5C missiles publicly in September 2025, a deliberate signal at a time when arms control discussions are breaking down.

The consensus among strategic analysts is nuanced. No one expects warheads to start launching on February 6. But the direction matters.

Former Pentagon Deputy Director for Strategic Stability Austin Long (MIT) described today's security environment as "night and day" compared to when New START was negotiated. The threat landscape now includes three nuclear-armed major powers, not two.

A nuclear expert at the UN Institute for Disarmament Research, offers a counterpoint: Russia is financially constrained by the war in Ukraine and has limited appetite for a rapid buildup. That holds some of the near-term risk in check.

That worst-case planning is already embedded in U.S. defense budgets. And that spending is what defense ETF investors are watching.

Defense ETFs have been on a sustained run. The question now is whether the post–New START environment sustains that momentum or introduces new volatility.

Here's where the key funds stand as of February 26, 2026:

For context, the S&P 500 YTD is approximately +2.8%. Defense ETFs are running ahead of the broad market by a significant margin and that spread reflects genuine fundamental support, not just momentum.

ITA is the dominant fund with $13.26 billion in AUM. Top holdings include GE Aerospace (21.5%), RTX (16.4%), and Boeing (8%). The fund has returned up 61% over the past 12 months. At 0.38%, the cost of access is reasonable for the exposure provided.

XAR is worth watching for different reasons. Its equal-weighted methodology reduces concentration risk and provides more exposure to mid-cap names like Kratos Defense & Security Solutions (KTOS), whose shares were up 196% in 2025. XAR's 0.35% expense ratio makes it the most cost-effective broad defense option.

SHLD (Global X Defense Tech) stands out for its technology-forward focus on cybersecurity, electronic warfare, autonomous systems. It's up 8.3% YTD in 2026 alone, making it one of the strongest performers in this space. For investors who believe the next generation of defense is as much about software as hardware, SHLD provides differentiated exposure.

DFEN is a leveraged product (3x daily) intended for tactical, short-term use only. It amplifies both gains and losses. Not appropriate for long-term portfolio allocation, but worth tracking as a sentiment indicator for the sector.

The end of New START is one part of a broader macro thesis that's driving capital into defense:

1. NATO rearmament. European defense budgets are rising across the board. Germany, Poland, and the UK have all committed to meaningful increases. Transatlantic defense spending is a structural tailwind that extends beyond U.S. domestic policy.

2. The Golden Dome. Trump's announced missile defense initiative, with cost estimates above $500 billion, is a multi-year procurement catalyst. The B-21 Raider program, Columbia-class subs, and Sentinel ICBM replacement are all active contract cycles feeding directly into ETF holdings like ITA and XAR.

3. China's nuclear expansion. The tripling of China's arsenal since 2020 and DoD's projection of 1,000 warheads by 2030 creates the strongest argument for sustained U.S. nuclear spending regardless of which administration is in office. This is not a partisan budget item.

4. No arms control pipeline. With zero negotiations underway or planned, defense spending forecasts carry less downside risk than in prior cycles. There is no imminent treaty that could reduce procurement outlooks.

It would be incomplete not to address the downside.

Budget constraints are real. Wormuth's concern about national debt is legitimate. At $36+ trillion in federal debt, the political appetite for unconstrained nuclear modernization will face pressure. CBO's $95B/year estimate is a baseline but discretionary budget battles in Congress could slow contract timelines.

Diplomatic progress is possible. Trump has expressed genuine interest in a new trilateral agreement including China. If that process gains traction, even informally, it could reduce procurement urgency. The market would likely react defensively to credible arms control signals.

Valuation risk. Defense ETFs have run hard. ITA's 61% return over 12 months means the easy money may already be in the price. Investors initiating new positions need to consider entry point carefully.

Black swan risk. An unconstrained nuclear environment means higher risk of miscalculation or accidental escalation. If a serious incident occurs, the reaction across all risk assets, including defense equities, would be sharp and unpredictable.

The end of New START is not a crisis. It's a condition. 

A structural shift in the global security environment that has been building for years and was ratified, legally, on February 5.

What it means for investors is this: defense spending is no longer a cyclical bet. It's a structural allocation thesis backed by bipartisan budget support, a genuine three-power arms competition, and no near-term diplomatic circuit breaker.

ITA and XAR provide broad, cost-effective access to the sector. SHLD offers differentiated tech-forward exposure. For long-horizon investors in the 45–70 age bracket managing real wealth, a measured allocation to this space, with clear entry criteria and position sizing, is worth serious consideration.

The world has been here before. After SALT II lapsed in 1979, both superpowers kept spending, until a new deal was eventually struck. History suggests this period of unconstrained competition will eventually produce a new framework.

But that framework isn't coming this week. And between now and then, the contracts are real, the budgets are signed, and the ETFs are tracking every dollar.

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Disclaimer: This is not financial or investment advice. Do your own research and consult a qualified financial advisor before investing.