2026 ETF Investment Predictions: 6 Key Insights

Bassyonni

ago 1 day

Exchange-traded funds (ETFs) have enjoyed a remarkable performance over the past year, collecting over $1 trillion in new investments for the second consecutive year. Total assets in the ETF market now exceed $13 trillion, indicating a robust growth momentum. Additionally, the market witnessed the launch of more than 1,100 new ETFs, marking a record in product development.

2026 ETF Investment Predictions: 6 Key Insights

As the ETF landscape evolves, several trends and predictions are emerging for 2026. Analysts from El-Balad have compiled key insights into what investors can expect in the coming year.

1. Bond ETFs to Capture 33% Market Share

Bond ETFs are set to gain substantial market share, projected to reach 33% by the end of 2026. In 2025 alone, asset managers launched 149 new bond ETFs. Currently, bond ETFs account for 29.6% of total investments in bond funds or ETFs, a significant increase from 10.2% just a decade ago.

2. Cashlike ETFs to Experience Record Inflows

Cashlike ETFs are expected to attract unprecedented inflows in 2026. In 2025, these instruments amassed over $100 billion. With the low interest rates offered by banks and relatively high bond yields, investors are likely to flock to short-term bond ETFs as safer alternatives amidst economic uncertainty.

3. Rise of Discretionary Active ETFs

Discretionary active ETFs are anticipated to proliferate as they gain traction in the market. In 2025, nearly 1,000 active ETFs were launched, focusing on innovative strategies such as individual stock picks and systematic options. A key factor driving this growth is the SEC’s approval of active ETF share classes, allowing easy asset migration between mutual funds and ETFs.

4. Thematic ETFs Flourishing with AI Trends

The AI sector is set to revitalize thematic ETFs. In 2025, thematic ETFs focusing on technology captured $10.6 billion, leading to expectations of similar success in 2026. New AI-focused funds are expected to emerge, driven by growing investor interest in AI-related technologies.

5. Potential Closure of Trading Tool ETFs

Around 20% of trading tool ETFs, designed for leveraged or inverse exposure to various assets, may not survive the volatile market conditions. With approximately 600 trading tool ETFs currently available, past trends indicate a risk of widespread closures if market conditions deteriorate.

6. Structured Note ETFs Anticipated to Break Out

Structured note ETFs are positioned for a breakout year in 2026, with numerous launches and increased investor interest. These complex investment vehicles utilize derivatives to target specific outcomes, including income generation and risk management.

Key Takeaways for ETF Investors

Investors should remain aware of potential market dynamics shaping ETF performance in 2026.
Understanding vital trends, such as the rise of cashlike ETFs and bond ETFs, will be crucial.
Discretionary strategies and thematic focuses, especially around AI, are likely to dominate market conversations.

While predictions can be speculative, they highlight significant areas of development ripe for investor consideration in the year ahead.