ETF Trends 2025 Review & 2026 Outlook Amid Record-High U.S. Equity Markets

This analysis is based on the ETF Trends report published on December 26, 2025, which released the 2025 Year in Review & 2026 Investment Outlook featuring Chief Investment Strategist Fritz Folts, CEO/CIO Steve Cucchiaro, and Deputy CIO Eric Biegeleisen[4]. The report aligns with U.S. equity markets entering the final week of 2025 near record highs, with major indices posting strong year-to-date (YTD) gains: S&P 500 (+17.39%), Nasdaq Composite (+21.59%), Dow Jones Industrial Average (+14.18%), and Russell 2000 (+13.05%, reflecting small-cap underperformance)[0]. The technology sector led performance throughout 2025, driven by AI, cloud infrastructure, and data center spending, with Information Technology, Communication Services, and Consumer Discretionary sustaining sector leadership[2][3]. On December 26, a holiday-shortened trading session resulted in low volume (S&P 500: 1.44B shares vs. 5.14B daily average) and minor pullbacks: S&P 500 (-0.09%), Nasdaq (-0.22%), Dow (flat)[0]. Investors are now targeting the S&P 500 7,000 milestone to close the year[1].

1. Tech Sector Momentum as a Foundation
   : The technology sector’s 2025 outperformance (15% higher indexed returns than the S&P 500 by November) provides critical context for the 2026 outlook, as strategists will likely assess whether this momentum can be sustained amid evolving AI and tech spending trends[2][4].
2. Holiday Low Volume and Investor Caution
   : The sharp drop in trading volume on December 26 indicates many investors are awaiting full details of the ETF Trends 2026 outlook and year-end rebalancing opportunities before making significant positioning changes[0][4].
3. Psychological Milestone Impact
   : The S&P 500’s 7,000 target has emerged as a key psychological level for year-end sentiment, with market participants monitoring whether the index can reach this milestone during the low-volume holiday period[1].

• Tech Sector Tailwinds
  : Continued growth in AI, cloud, and data center spending may sustain the technology sector’s momentum into 2026, building on its 2025 leadership[2][3].
• ETF Trends Outlook Insights
  : Full details from the 2026 investment outlook could offer actionable guidance for investors adjusting portfolios for the upcoming year[4].

• Tech Sector Volatility
  : Mid-2025 turbulence over AI spending concerns serves as a reminder of potential volatility in the leading technology sector[1].
• Low Volume Price Swings
  : Holiday-shortened trading volumes increase the risk of exaggerated price movements due to limited market participation[0].
• Small-Cap Underperformance
  : The Russell 2000’s lagging YTD performance (13.05% vs. S&P 500’s 17.39%) raises questions about the breadth of market momentum[0].

• ETF Trends Report
  : Released on December 26, 2025, featuring 2025 market review and 2026 outlook from senior strategists[4].
• 2025 Market Performance
  : Major U.S. indices posted strong YTD gains led by the technology sector, with the S&P 500 up 17.39% as of December 26[0].
• Recent Trading
  : Holiday-shortened December 26 session saw low volume and minor pullbacks in the S&P 500 and Nasdaq[0].
• Investor Focus
  : Targeting the S&P 500 7,000 milestone and awaiting full ETF Trends 2026 outlook details[1][4].
• Notable Movers
  : Applied Digital (APLD) was the top-performing internet services stock YTD; IREN was the top-performing application software stock YTD[5][6].