Momentum ETFs Are Leading the Market
Momentum investing is outperforming in 2026 as AI-driven technology stocks fuel strong gains across U.S. equity factor ETFs.
Among U.S. equity investment factors, momentum has delivered compelling year-to-date returns, driven by the strong performance of companies in the A.I. ecosystem. Although the information technology sector's performance dipped earlier in the year due to a sell-off in software services and market uncertainty arising from the Iran conflict, there has been a sharp recovery in recent weeks, supported by strong reported earnings from the sector’s leading firms.
Info. Tech Leads Revenue Growth Within S&P 500
According to FactSet, the information technology sector recorded the highest year-over-year revenue growth rate among the eleven sectors in Q1 earnings, at 29.2%. It is also the largest driver of revenue growth for the overall index. Excluding this sector, the combined revenue growth rate for the S&P 500 in Q1 would fall from 11.4% to 9.0%. At the industry level within the sector, all six industries reported year-over-year revenue growth: Semiconductors & Semiconductor Equipment (52%), Technology Hardware, Storage, & Peripherals (28%), Electronic Equipment, Instruments, & Components (24%), Software (19%), Communication Equipment (16%), and IT Services (8%).
Capturing Momentum via ETFs
The success of momentum investing is likely best explained by behavioural finance theories — investors tend to buy rising stocks, which then drive prices higher. Currently, equities linked to the AI theme are the top performers, attracting investor capital toward firms within the ecosystem. For those aiming to gain exposure to leading firms within the AI supply chain, momentum investing offers a way to do so while maintaining some diversification.
For Canadian investors interested in U.S. Momentum ETFs, the iShares MSCI USA Momentum Factor Index ETF (Ticker: (Ticker: XMTM), Fidelity U.S. Momentum ETF (Ticker: FCMO), and CI U.S. Enhanced Momentum Index ETF (Tickers: (Tickers: CMOM.B/CMOM) are all turnkey solutions that provide exposure to the equity factor.
This article was written on May 18th, 2026. Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.
