The Comeback of Momentum ETFs: Exploring the Factors Behind the Recent Spike in Popularity
- Momentum ETFs surged in 2025, outperforming benchmarks with $377B institutional inflows driven by shifting market sentiment and active ETF growth. - Adaptability through dynamic risk management and factor tilts helped momentum strategies retain appeal despite tech sector corrections. - Regulatory innovations like SEC Rule 6c-11 and thematic investing in AI/energy fueled ETF expansion, with 396 new active ETFs launched in H1 2025. - Academic research confirms momentum's long-term robustness but warns of r
Market Sentiment: Shifting from Tech Mania to Strategic Rebalancing
Investor sentiment has shifted dramatically in 2025, especially within technology and AI industries. Although high-profile momentum stocks such as Tesla and Broadcom have experienced a decline in returns, the overall popularity of momentum investing remains strong. For example,
The correction in overvalued technology shares has also led to a renewed focus on value stocks, yet momentum ETFs have responded by adopting advanced risk management approaches.
Structural Changes: Growth of Active ETFs and Enhanced Efficiency
Institutional players are at the forefront of this shift.
Historical Context: Regulatory Progress and Thematic Strategies
The current surge in active ETFs echoes the expansion of ETFs in the 2000s, when the market broadened from equities to include bonds, commodities, and factor-based products
Thematic investing has also played a significant role in the renewed popularity of momentum ETFs.
Academic Perspectives: Factor Strategies and Momentum’s Boundaries
Scholarly research offers a deeper understanding of the momentum comeback.
Still, momentum’s success is not assured. As ETFs become more accessible and streamlined,
Looking Forward: Weighing Opportunities Against Risks
The renewed strength of Momentum ETFs reflects the dynamic relationship between investor attitudes and structural change. While institutional investments and thematic trends have driven expansion, caution remains essential.
At present, the narrative of momentum ETFs is one of adaptability and transformation.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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