To The Moon

As we step into 2026, the investment landscape continues to evolve amid economic shifts, technological advancements, and global uncertainties. Momentum trading, a strategy that capitalizes on the continuation of existing market trends, remains a popular approach for investors seeking to ride waves of upward price movements. 

This style involves selecting assets that have shown strong recent performance, betting that their positive trajectory will persist. With AI-driven growth, easing monetary policies, and potential earnings expansions on the horizon, momentum strategies could shine brightly this year.

In this article, we'll explore some of the top exchange-traded funds (ETFs) well-suited for momentum trading in 2026. These funds target stocks exhibiting high momentum characteristics, often based on factors like price trends, earnings revisions, and relative strength. While past performance isn't indicative of future results, these ETFs have demonstrated resilience and potential in dynamic markets. We'll focus on a mix of pure momentum factor ETFs and those with strong momentum themes, such as small caps and commodities, which analysts expect to carry forward into the new year.

Why Momentum Trading in 2026?The stage is set for momentum plays due to several tailwinds. Strong corporate earnings, particularly in tech and AI sectors, are projected to continue their upward trend. Broader market indices like the S&P 500 are entering the year with solid gains from 2025, and small-cap stocks are poised for a rebound amid lower interest rates. 

Commodities like gold and silver may also benefit from inflationary pressures and geopolitical tensions. However, momentum strategies aren't without risks—they can be volatile during market reversals, so diversification and risk management are key.

Top Momentum-Focused ETFs for 2026Here are five standout ETFs that align with momentum trading principles. Each offers exposure to high-performing assets, with low expense ratios and substantial liquidity to facilitate active trading.

1. iShares MSCI USA Momentum Factor ETF (MTUM)

This ETF tracks the MSCI USA Momentum Index, selecting large- and mid-cap U.S. stocks with the highest risk-adjusted momentum scores over the past 6 to 12 months. It's heavily weighted toward technology and growth sectors, making it ideal for capturing AI and innovation-driven rallies. With assets under management exceeding $20 billion, MTUM provides broad diversification across about 125 holdings. Its low expense ratio of around 0.15% keeps costs minimal, allowing traders to maximize returns from short-term trends. In a year where tech earnings are expected to surge, MTUM could be a core holding for momentum enthusiasts.

2. Invesco S&P 500 Momentum ETF (SPMO)

Focusing exclusively on S&P 500 components, SPMO invests in the top 100 stocks showing the strongest momentum, rebalanced quarterly. This fund emphasizes large-cap leaders in industries like semiconductors and software, which have been outperformers recently. With over $13 billion in assets and an expense ratio of 0.13%, it's a cost-effective way to bet on blue-chip momentum. As the bull market potentially extends into 2026 with supportive policies, SPMO's focus on established winners could deliver consistent gains, though it may underperform in value rotations.

3. SEI Enhanced U.S. Large Cap Momentum Factor ETF (SEIM)

A relative newcomer but gaining traction, SEIM seeks long-term appreciation by targeting U.S. large-cap stocks with enhanced momentum signals, incorporating factors like earnings quality and volatility. It aims to outperform traditional momentum benchmarks by applying proprietary enhancements. With a competitive expense ratio of 0.15%, this ETF is suitable for investors looking for a refined take on momentum. In 2026, amid optimistic earnings forecasts, SEIM's emphasis on stable high-momentum stocks could provide a buffer against market dips.

4. iShares Russell 2000 ETF (IWM)

While not a pure momentum fund, IWM tracks the Russell 2000 Index of small-cap U.S. stocks, which often exhibit strong momentum during economic recoveries. Small caps have shown early signs of revival, driven by lower borrowing costs and domestic growth prospects. With an expense ratio of 0.19% and massive liquidity, it's a favorite for traders capitalizing on rotational shifts. Expect IWM to gain steam in 2026 if inflation cools and consumer spending rebounds, though it's more volatile than large-cap peers.

5. VanEck Junior Gold Miners ETF (GDXJ)

For commodity-based momentum, GDXJ offers exposure to small- and mid-cap gold mining companies, which thrive on rising precious metal prices. Gold's momentum could accelerate in 2026 due to safe-haven demand amid geopolitical risks and potential currency fluctuations. The fund's expense ratio is 0.52%, reflecting its specialized focus, and it holds around 80 companies. Traders can use GDXJ to hedge against equity volatility while chasing upward trends in metals.

Strategies for Success with These ETFsTo effectively incorporate these ETFs into a momentum trading portfolio, consider the following tips:Timing Entries and Exits: Use technical indicators like moving averages or relative strength index (RSI) to identify buy signals when momentum is building.

Diversification: Blend pure momentum funds like MTUM with thematic ones like GDXJ to spread risk across sectors.

Risk Management: Set stop-loss orders to protect against sudden reversals, as momentum can fade quickly in bearish turns.

Monitor Macro Factors: Keep an eye on interest rate decisions, earnings reports, and global events that could influence trends.

Final Thoughts

Momentum trading in 2026 offers exciting opportunities for agile investors, particularly through ETFs that provide efficient, low-cost access to trending assets. Whether you're drawn to tech-heavy large caps or commodity plays, funds like MTUM, SPMO, and GDXJ stand out for their potential to harness market inertia. Remember, investing involves risks, and it's essential to align these choices with your overall financial goals and risk tolerance.