5 Momentum ETFs With More Room to Run in 2026

Wall Street has been wavering in 2025-end due to overvaluation concerns in artificial intelligence (AI) stocks. The U.S. labor market has shown signs of weakening, and consumer sentiment has remained somewhat muted.

U.S. retail sales rose only 0.2% sequentially in September 2025, marking the smallest increase in four months, and below forecasts of a 0.4% gain, per tradingeconomics. This further points toward the fragile consumer spending behavior.

Why the AI Bubble Is Unlikely to Burst Now

Despite economic uncertainty, the AI boom remains intact. Earnings growth is holding up, thanks to a massive AI investment cycle that still drives Big Tech’s capex (read: AI Valuations Rich, But Strong Earnings a Plus: ETFs in Focus).

Wedbush analyst Dan Ives is quite bullish, arguing the tech market isn’t in a bubble – instead, he sees the industry in year three of an 8–10 year AI buildout, as quoted on CNBC. He expects the tech bull market to continue for at least two more years.

Upbeat 2026 Forecast for S&P 500

The S&P 500 projections for 2026 remain bullish. Oppenheimer set the S&P 500 2026 year-end target to the Wall Street-high at 8100, per Reuters, as quoted on Tradingview. If the index reaches the 8,000-mark by 2026, it would represent about a 16% gain.

Deutsche Bank argues that the ongoing investment flows, strong buybacks and persistent earnings strength have set the stage for “mid-teens returns” next year, as mentioned in a Yahoo Finance article (read: S&P 500 to Hit At Least 7,500-Mark in 2026? ETFs in Focus).

Momentum Investing Worth a Look

Against this backdrop, momentum investing should not be avoided altogether, although economic strains remain. Let’s find out what could drive momentum investing heading into 2026.

Earnings Growth to Remain Resilient in 2026?

Total earnings, or aggregate net income, for the S&P 500 in 2025 are expected to rise 11%, with 2026 earnings projected to increase 11.8%, per the Earnings Trends issued on Nov. 19, 2025. Revenue growth for full-year 2025 and 2026 is forecast at 5.2% and 6.7%, respectively. Margins are expected to be 0.70% in 2025 and 0.63% in 2026.

Uptick in GDP Growth Projections

The Federal Reserve expects real GDP to be 2.3% in 2026 (up from 1.8% predicted in September), 2% in 2027 (up from 1.9% projected in September) and 1.9% in 2028 (up from the earlier estimate of 1.8%). Unemployment rate projections are maintained at 4.4% for 2026, while the rate is projected to decline by one percentage point to 4.2% in 2027. The PCE inflation is projected to be 2.5% (down from the earlier estimate of 2.6%).

Will We See More Fed Rate Cuts in 2026 Than Expected Now?

Fed Chair Powell’s term is ending in May. President Trump favors a low-rate environment. Trump signaled that his choice for the next Fed chair will depend on whether they move quickly to cut interest rates, per Bloomberg, as quoted on Yahoo Finance.

As of now, after three rate cuts in 2025 totaling three-quarters of a percentage point, the Fed’s outlook for 2026 looks more controlled. Policymakers continue to project just one rate cut next year, consistent with their September forecast.

Fed Funds rate is projected to be 3.4%, the same as projected in September. Fed Funds rates are expected to be 3.1% for both 2027 and 2028. However, if the labor market improves, inflation declines, and we receive a Fed chief who is more dovish in policy approach, we may see more than one cut in 2026.

High-Momentum ETFs to Buy

This kind of scenario should be great for momentum stocks, especially with easing trade tensions that unsteadied much of 2025. Against this backdrop, investors should closely track momentum-based exchange-traded funds (ETFs) like iShares MSCI USA Momentum Factor ETF MTUM.  

We also highlight a few ETFs that are in high momentum currently and have the potential to rally ahead.

VanEck Junior Gold Miners ETF GDXJ – Up 13.2% over the past month

iShares Silver Trust SLV – Up 19.3% over the past month

State Street SPDR S&P Bank ETF KBE – Up 8.3% Over the Past Month

State Street SPDR S&P 400 Mid Cap Value ETF MDYV – Up 4.8% Over the Past Month

iShares Russell 2000 ETF IWM – Up 5.8% Over the Past Month

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This article originally published on Zacks Investment Research (zacks.com).

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