Time to Capitalize on Market Moves With Momentum ETFs?

The S&P 500 has staged a remarkable comeback this month, marking one of its fastest recoveries in recent history. The index turned positive for 2025 after tumbling to near bear market levels on April 8, courtesy of President Trump's aggressive tariff plans. This resurgence signals a potential new bull market.

Even Moody's downgrade of U.S. debt was unable to derail the rally, with the S&P 500 logging its sixth consecutive gain, reflecting investor confidence in the market's fundamentals. The 90-day U.S.-China trade truce and strong earnings, especially from tech giants, renewed market optimism (read: Moody's Downgrades U.S. Rating: What's Next for S&P 500 ETFs?).

Wall Street strategists have turned increasingly bullish once again on the S&P 500 outlook for the year, fueled by a 90-day truce in U.S.-China tariff tensions that has sparked a market rally. Goldman Sachs raised its year-end target for the S&P 500 to 6,100 from 5,900. Yardeni Research also lifted its forecast to 6,500 from 6,000, implying an additional 11% gain from current levels. Both firms cited easing concerns about a major economic slowdown as the key driver behind their optimism.

One of Wall Street's most bullish strategists, Wells Fargo, continued to think the S&P 500’s price target of $7,000 is achievable this year and is now the highest among all the strategists (read: Growth ETFs Outperform Amid Historic Market Comeback). 

Against this backdrop, momentum investing would be a winning strategy for those seeking higher returns in a short spell. This is because the strategy seeks to capitalize on the continuance of an existing market trend. It looks to fetch profits from buying hot stocks that have shown an uptrend over the past few weeks or months.

As such, we have presented five ETFs that could lead to outperformance in the current market environment. Further, these could even beat broader market returns in the coming months if the trend prevails. These include Invesco S&P 500 Momentum ETF SPMO, iShares MSCI USA Momentum Factor ETF MTUM, Qraft AI-Enhanced U.S. Large Cap Momentum ETF AMOM, SPDR S&P 1500 Momentum Tilt ETF MMTM and JPMorgan U.S. Momentum Factor ETF JMOM. These ETFs seek higher returns in a short spell and will continue their outperformance if the same trends prevail.

Why Momentum?

Momentum investing aims to capitalize on the continuance of an existing market trend. It involves the purchase of assets that have been showing an upward trend in price or the sale of assets that have been showing a downward trend, with the expectation that the trend will continue. As such, investors can potentially achieve high returns by buying stocks in an uptrend and selling them when they show signs of reversing.

Numerous studies have demonstrated the effectiveness of momentum as a factor in stock selection. Momentum strategies have historically performed well across different markets and time periods, although past performance is not indicative of future results.

ETFs in Focus

Invesco S&P 500 Momentum ETF (SPMO) 

Invesco S&P 500 Momentum ETF tracks the S&P 500 Momentum Index, which measures the performance of stocks in the S&P 500 index that have a high "momentum score.” It holds 100 securities in its basket and charges 13 bps in fees per year. Information technology is the top sector with a 21% share, while financials, consumer discretionary, communication services, and consumer staples round off the next four with double-digit exposure each. Invesco S&P 500 Momentum ETF has AUM of $7.5 billion and trades in an average daily volume of $1.4 million.

iShares MSCI USA Momentum Factor ETF (MTUM) 

iShares MSCI USA Momentum Factor ETF follows the MSCI USA Momentum SR Variant Index, holding 123 stocks and exhibiting a relatively higher price momentum. It is skewed toward the financial sector at 24.2%, while information technology, industrials, consumer staples and communication round off the next spots with double-digit exposure each. iShares MSCI USA Momentum Factor ETF has accumulated $16.8 billion in its asset base and charges 15 bps in fees per year. It trades in an average daily volume of 919,000 shares (read: Trade Hopes Boost Wall Street: ETFs to Tap).

Qraft AI-Enhanced U.S. Large Cap Momentum ETF (AMOM) 

Qraft AI-Enhanced U.S. Large Cap Momentum ETF is an actively managed exchange-traded fund that seeks capital appreciation by investing in stocks that exhibit higher price momentum. It holds 50 stocks in its basket. Technology is the top sector with a 36.5% allocation, followed by financials and consumer cyclical. Qraft AI-Enhanced U.S. Large Cap Momentum ETF has accumulated $28.6 million in its asset base and charges 75 bps in annual fees. It trades in an average daily volume of 5,000 shares. 

SPDR S&P 1500 Momentum Tilt ETF (MMTM) 

SPDR S&P 1500 Momentum Tilt ETF offers exposure to the stocks exhibiting the strongest momentum characteristics by tracking the S&P 1500 Positive Momentum Tilt Index. It holds 1,462 stocks in its basket, with key holdings in information technology, financials and consumer discretionary. SPDR S&P 1500 Momentum Tilt ETF has amassed $145.5 million in its asset base and charges 12 bps in annual fees from investors. 

JPMorgan U.S. Momentum Factor ETF (JMOM) 

JPMorgan U.S. Momentum Factor ETF is designed to provide equity exposure with a focus on companies with strong risk-adjusted momentum and the potential to enhance returns. It follows the JP Morgan US Momentum Factor Index and holds 270 stocks in its basket. Technology is the top sector at 34.9%, while consumer discretionary, industrials, and financials round off the next spots with double-digit exposure each. JPMorgan U.S. Momentum Factor ETF has AUM of $1.5 billion and charges 12 bps in annual fees. It trades in an average daily volume of 86,000 shares.
 

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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

Zacks Investment Research