5 ETFs to Buy for January

As the market has entered 2026, the S&P 500 is coming off a third straight year of returns well above its long-term annual average of roughly 10%.Investors entered 2026 with notable concerns.

While GDP growth has accelerated and inflation has eased, the U.S. economy is increasingly showing signs of a “K-shaped” recovery, as mentioned in a Yahoo Finance article. Geopolitics took center stage following the U.S. move to oust and capture Venezuelan leader Nicolas Maduro.

Lingering additional worries include heavy spending in the AI space, rich equity valuations, mounting risks in private credit and corporate debt, and a host of geopolitical uncertainties.Most central banks will likely hold off on monetary policy easing in the near term.

But then, these could not keep Wall Street in backfoot. SPDR S&P 500 ETF Trust SPY gained 1.2% from the start of this year till Jan. 6, 2026. SPDR Dow Jones Industrial Average ETF Trust DIA and Invesco QQQ Trust, Series 1 QQQ have added 2.5% and 1.2% so far this year, respectively.

Value quotient appeared to have shown more power than the growth ones. State Street SPDR Portfolio S&P 500 Value ETF SPYV (up 1.5%) beatState Street SPDR Portfolio S&P 500 Growth ETF SPYG (up 1%) from the start of this year till Jan. 6, 2026.

Against this backdrop, below we highlight a few exchange-traded funds (ETFs) that could gain in January.

ETFs in Focus

iShares Russell 2000 ETF IWM

Wall Street staged a rally in early 2026. The strong trend is likely to continue, given the historical trend of the “January Effect.” The January Effect is a seasonal uptick in stock prices mainly due to year-end tax considerations. Investors sell underperforming stocks in December for tax-loss harvesting and repurchase them after the New Year, as quoted on Investopedia. Small-cap securities normally exhibit their outperformance in January, noted in the above-mentioned source.

iShares MSCI USA Momentum Factor ETF MTUM

New-year inflows from retirement contributions, bonuses and fund rebalancing often chase recent winners, extending momentum early in the year. Fund managers often reset portfolios and take new bets in January, normally adding high-momentum names.

VanEck Semiconductor ETF SMH

Chip stocks surged in 2025, riding on sustained demand for artificial intelligence, cloud computing and advanced data centers. Heavy spending by hyper-scalers and enterprises boosted orders for high-performance processors, memory and networking chips.

Even as parts of the broader tech sector faced volatility, chipmakers outperformed, thanks to strong end-market demand and the AI-led investment cycle. The Fed’s easy money policy acted as another tailwind. The start of 2026 has been even more exciting with NVIDIAunveiling its next-generation Vera Rubin superchip at CES 2026 in Las Vegas.

The chip is part of Nvidia’s newly branded Rubin platform, which consists of six interconnected chips. Meanwhile, AMD (AMD) introduced the company’s upcoming AI data center platform, offering the first glimpse of the Helios system and outlining its underlying design.

State Street SPDR S&P Aerospace & Defense ETF XAR

Defense stocks rallied to start January as U.S. action against Venezuela and renewed geopolitical tensions lifted military spending expectations. Global defense spending could surpass $3.6 trillion by 2030, suggesting a 33% rise from the 2024 reported level, according to Global X, as nations boost AI, drones and cyber defenses, with bipartisan U.S. support (read: Why Defense Stocks & ETFs Can Continue to Soar).

Meanwhile, rising global air travel is set to underpin long-term growth for commercial aerospace companies.Trump also issued direct threats of military intervention in Iran if the government cracks down on the domestic protestors.Defense contractors like LMT, NOC and RTX have historically seen shares rise during past U.S.-Iran tensions (read: Defense ETFs to Gain if Trump Acts on His Intervention Threat on Iran).

US Pharmaceuticals iShares ETF IHE

With AI bubble fears doing the rounds and the economy moving ahead at a sluggish pace, safe sectors like healthcare gained precedence lately. Moreover, biotech stocks have been strengthening due to innovations and increased mergers and acquisitions. In 2026, the industry will be on its way to entering an investment “super-cycle,” with major drugmakers committing about $370 billion to U.S. projects over the next five years, according to a DPR Construction report.

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

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