Momentum ETFs Poised for Growth: What 2026 Could Bring for Investors

The Case for Momentum Investing in Uncertain Times

Despite lingering concerns about valuation in the technology sector and moderating consumer spending patterns, momentum ETFs warrant serious consideration for 2026. Recent economic indicators—including U.S. retail sales that increased only 0.2% sequentially in September, falling short of the 0.4% forecast—suggest headwinds for consumer activity. Yet beneath this uncertainty lies a compelling investment thesis rooted in resilient earnings and strong technology sector momentum.

Why AI Remains a Growth Engine

Contrary to recession predictions, the artificial intelligence investment cycle continues to fuel major technology companies’ capital expenditure. According to Wedbush analyst Dan Ives, the tech sector is merely in year three of an 8-10 year AI infrastructure buildout—far from a bubble environment. This perspective supports a bullish outlook on momentum stocks, which have historically thrived during periods of strong earnings growth and capital reallocation toward growth-oriented assets.

2026 Economic Outlook: Tailwinds for Market Momentum

Earnings Strength Projected to Continue

S&P 500 earnings are forecast to expand 11.8% in 2026, following an 11% increase in 2025. Revenue growth is projected at 6.7% for 2026, up from 5.2% in 2025. These projections suggest that earnings momentum could accelerate, providing fundamental support for momentum-based investment strategies.

GDP Growth and Labor Market Signals

The Federal Reserve’s latest projections show real GDP growth of 2.3% in 2026, revised upward from the September estimate of 1.8%. The unemployment rate is expected to remain stable at 4.4%, before declining to 4.2% in 2027. PCE inflation is projected at 2.5%. These economic parameters create a balanced environment where growth remains intact without excessive inflation pressures.

The Fed Rate Picture

After three rate cuts totaling 0.75% in 2025, the Fed currently projects just one rate cut for 2026, with the Fed Funds rate reaching 3.4%. However, this baseline scenario could change materially. With Fed Chair Powell’s term ending in May and President Trump signaling preference for a dovish successor, additional rate cuts remain possible if labor market conditions soften or inflation moderates further. A more accommodative Fed stance would benefit momentum ETFs significantly.

S&P 500 Price Targets Signal Room for Upside

Major Wall Street firms remain constructive on equities heading into 2026. Oppenheimer projects the S&P 500 to reach 8,100 by year-end 2026, representing potential upside. Deutsche Bank argues that ongoing institutional investment flows, robust share buybacks, and sustained earnings power position the market for “mid-teens returns” in 2026. These targets suggest momentum-driven sectors have considerable room to advance.

High-Momentum ETFs Worth Tracking

Several momentum ETFs have demonstrated particular strength and merit close monitoring:

iShares MSCI USA Momentum Factor ETF (MTUM) serves as a core momentum exposure, capturing U.S. companies exhibiting the strongest price and earnings momentum characteristics.

VanEck Junior Gold Miners ETF (GDXJ) has surged 13.2% over the past month, benefiting from gold’s safe-haven appeal and junior mining sector recovery.

iShares Silver Trust (SLV) posted a robust 19.3% monthly gain, reflecting precious metals’ broader rally amid economic uncertainty.

State Street SPDR S&P Bank ETF (KBE) advanced 8.3% over the past month, capitalizing on financial sector rotation and potential easing interest rate environment.

State Street SPDR S&P 400 Mid Cap Value ETF (MDYV) recorded a 4.8% monthly increase, benefiting from selective value accumulation in mid-cap equities.

iShares Russell 2000 ETF (IWM) climbed 5.8% over the past month, suggesting renewed investor appetite for smaller-cap equities as trade tensions ease.

The Investment Thesis for 2026

As geopolitical trade tensions that weighed on markets throughout 2025 show signs of abating, momentum ETFs present an attractive vehicle for capturing earnings-driven rallies and sector rotation. The combination of accelerating earnings growth, stable economic expansion, and potential Fed accommodation creates a favorable backdrop for momentum strategies to outperform. Investors seeking exposure to this dynamic should consider the momentum ETFs highlighted above as core portfolio components heading into 2026.