S&P 500's Record Streak Boosts High Beta, Momentum ETFs

Wall Street has been on a solid run in recent weeks, making a series of new record highs. The S&P 500 notched its fifth consecutive record close last week, and its 14th record close of 2025. SPDR S&P 500 ETF Trust SPY, the proxy version of the S&P 500 Index, gained 1.5% last week and has risen 9.3% so far in 2025. 

The rally has been bolstered by solid corporate earnings, resilient economic data and growing optimism that trade tensions may ease. The booming AI craze, Fed rate cut hopes and retail investor frenzy also added to the strength. 

In such a scenario, high-beta and high-momentum products are outperforming and are intriguing choices for a short spell. These are Invesco S&P 500 High Beta ETF SPHB, iShares MSCI USA Momentum Factor ETF MTUM, Invesco S&P 500 Momentum ETF SPMO and JPMorgan U.S. Momentum Factor ETF JMOM. SPMO emerged as the biggest winner of the bull market this year, climbing 21.5% while SPHB and MTUM gained about 17% each. JMOM is up 12.3%.

High-beta ETFs experience larger gains than their broader market counterparts in a bullish market, while momentum investing looks to capture profits from buying hot stocks, which have shown an uptrend over a few weeks or months.

Trade Optimism

Ongoing progress in U.S. trade talks with key partners, especially Japan and the European Union, lifted investors' optimism. A U.S.-Japan deal reduced auto tariffs to 15%, while a tentative U.S.-EU framework proposed similar reductions. Trump also announced a framework agreement with Indonesia and hinted at more deals before the Aug. 1 tariff deadline. These developments eased the risk of severe tariff threats, boosting confidence across markets (read: Growth ETFs Set New Records, Brush Off Tariff Headwinds).

Strong Corporate Earnings

The second-quarter earnings season is off to a robust start, with an above-average proportion of companies beating consensus estimates. Additionally, the combination of a stabilizing macroeconomic backdrop and reassuring management commentary is helping to reverse the earlier negative revisions trend, with estimates for the second half of the year starting to increase again.  

Total earnings for the 117 S&P 500 companies that have already reported Q2 results are up 8.3% from the same period last year on 5.3% higher revenues, with 87.2% beating EPS estimates and 80.3% beating revenue estimates, per the Earnings Trend report. Notably, earnings and revenue beats are tracking notably above the historical average for this group of companies (read: 5 Sector ETFs Set to Power Q2 Earnings Growth).

Resilient U.S. Economy

Despite global uncertainty, the U.S. economy has shown surprising strength. June retail sales exceeded expectations and unemployment remains near historic lows. This economic resilience is giving investors confidence that earnings growth can be sustained into the second half of the year.

AI Boom and Tech Leadership

The ongoing AI boom continues to fuel enthusiasm for large-cap tech stocks, which have an outsized influence on the S&P 500. Investors are betting on long-term growth in AI applications across industries, boosting demand for semiconductors, cloud computing and software platforms.

Fed Rate Cut Hopes

Investor sentiment has also been lifted by increasing confidence that the Fed may begin cutting interest rates by the end of 2025.

Retail Investor Buying Spree

The stock market’s latest surge to all-time highs is being powered by a flood of retail investors diving into equities. Retail traders poured in about $50 billion into stocks over the prior month, according to Barclays, with total net purchases hitting $270 billion in the first half of 2025 and potentially reaching $360 billion by year-end.

According to JPMorgan, retail investors purchased a staggering $270 billion worth of stocks in the first half of 2025. The bank expects another $360 billion in net buying from retail through year-end, a move that could propel the S&P 500 another 5% to 10% higher.

This surge in retail activity fueled much of the market’s momentum, outpacing institutional flows. 

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

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