5 ETF Predictions for the Second Half of 2025

Wall Street ended the first half of 2025 on a high note, staging a remarkable rebound following a tumultuous spring. The S&P 500 and Nasdaq Composite both closed at record highs, each gaining 5.5%, while the Dow Jones Industrial Average rose 3.6%. The momentum continues into the second half, with both the broad market and tech-heavy indexes hitting fresh records last week, and the blue-chip Dow now just 300 points shy of its all-time high. 

The latest leg of the rally was driven by artificial intelligence, trade optimism, strong corporate earnings and easing inflation. Additionally, Federal Reserve Chair Jerome Powell signaled a more accommodative stance during his June meeting, hinting that interest rate cuts could arrive later in the year. The central bank’s shift from a hawkish to dovish tone reassured investors that monetary policy would support the recovery.

Now, the rally has been broadening out from tech to other sectors, signaling that the bull market is here to stay. The S&P 500 is entering a historically strong period. With July historically being the strongest month for the S&P 500, averaging a 2.5% gain over the past two decades (Reuters/LSEG data), investors are looking to position themselves for further upside. Still, trade policy uncertainty and high valuations could inject volatility (read: S&P 500 Hits New Record Close: Why ETFs Could Gain More). 

Here are five ETF trends poised to shape the investment landscape in the second half of 2025:

AI Boom to Keep Rolling

The AI boom will continue to fuel the rally in the broad market, with companies investing huge sums in the technology sector and beyond. The expansion of AI applications holds the promise of ushering in fresh growth opportunities. Tech companies have poured billions into data centers and AI chips to support the growth of AI models.

Investors seeking to make the most of the AI industrial revolution should consider Global X Robotics & Artificial Intelligence ETF BOTZ, Global X Artificial Intelligence & Technology ETF AIQ and iShares Future AI & Tech ETF ARTY.

“Magnificent Seven” to Grow Further

With rates still high and volatility lingering, the Magnificent Seven stocks are proving to be the market’s new safe haven. Magnificent Seven stocks will continue to act as a defensive play amid market uncertainty. These stocks' dominance in terms of earnings strength, cash flow resilience and market leadership positions them as anchors during periods of volatility.  Three of the Mag 7 — NVIDIA NVDA, Microsoft MSFT, and Meta Platforms META — are up in double digits since the start of 2025 and are currently trading at or near record highs.

The race for the title of the world’s most valuable publicly traded company has intensified in 2025, with NVIDIA and Microsoft locked in a high-stakes battle for market-cap supremacy. Fueled by the explosive growth of artificial intelligence, the rivalry has captured Wall Street’s full attention and is reshaping the tech landscape in real time (read: Mag 7 ETFs Surge: Will the Rally Keep Rolling?).

Roundhill Magnificent Seven ETF (MAGS) is the best pick to play the boom in "Magnificent Seven." It is the first-ever ETF that offers investors equal-weight exposure to the “Magnificent Seven” stocks. MAGS has amassed $2.3 billion in its asset base and charges 29 bps in fees per year.

Tariff Uncertainty

Uncertainty surrounding tariffs looms large. While President Trump initially targeted July 9 for the reimplementation of paused duties, Treasury Secretary Scott Bessent recently confirmed enforcement will begin August 1. Deals with the UK, Vietnam, and China offer some optimism, but major negotiations with the EU, Canada, and others remain unresolved.

Amid such a scenario, dividend investing seems the best choice as it offers consistent and safe income. The strategy does not offer dramatic price appreciation but is a major source of consistent income for investors in any market. Top-ranked dividend ETFs like Vanguard Dividend Appreciation ETF VIG, Vanguard High Dividend Yield ETF VYM and iShares Core Dividend Growth ETF DGRO appear to be exciting picks.

Gold Set to Shine Further

Gold has been on a powerful upward trajectory this year, fueled by strong safe-haven demand amid Trump’s tariff chaos and escalating geopolitical tensions, continued central bank accumulation, weakening U.S. dollar, and growing expectations of Federal Reserve rate cuts. The strong trend is likely to continue for the rest of the year, with Goldman projecting the bullion to reach $3,700 by the end of 2025 (read: Gold ETFs Shine in 1H: Will the Bloom Continue in 2H?). 

The two largest gold ETFs — SPDR Gold Shares GLD and iShares Gold Trust IAU — are better plays to tap the surge in gold prices. These ETFs offer direct exposure to physical gold and are among the most liquid in the space.

International ETFs to Outperform

U.S. dollar weakness and international stimulus (Europe/China) are prompting investors to shift exposure overseas. Vanguard FTSE Developed Markets ETF VEU and Schwab International Equity ETF SCHF are the popular options in the international ETF space. These ETFs provide broad exposure to developed markets outside the United States, offering a way to tap into global recovery themes.
 

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

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