It will be hard to top 2025 for the ETF industry following a record $1.49 trillion of net inflows. But a year doesn’t need to break records to be remarkable. I’ve been lightly investing in ETFs for more than 25 years and publishing research on the products for 15. Every new year, there are specific segments of the market I have my eye on. Let’s cover three of them for 2026.
Small-Caps: A December Spark or a False Start?
The S&P 600 Index rose just 6% in 2025, lagging the S&P 500 by more than 1,000 basis points. However, small-caps did relatively better in the fourth quarter, lagging by less than 100 basis points. Lower interest rates following the Federal Reserve’s rate cuts helped provide a tailwind.
Small-cap ETFs were rare investment styles to incur net redemptions in 2025, though they saw a late burst of demand in December. The iShares Russell 2000 ETF (IWM ) and the iShares Core S&P Small-Cap ETF (IJR ) had net outflows of $4.6 billion and $2.7 billion, respectively, for the full year. I’m looking to see if that investor interest from December carries over into a sustained trend for 2026.
AI’s Physical Body and the Nuclear Power Bill
While many eyes were on artificial intelligence (AI) named ETFs, other related themes performed even better in 2025. The iShares A.I. Innovation and Tech Active ETF (BAI ) gathered $7.6 billion in 2025 , while the Dan Ives Wedbush AI Revolution (IVES ) quickly approached $1 billion in assets despite only launching in June 2025. For the second year in a row, AI-focused investments were in high demand.
However, other thematic ETFs posted even stronger returns. The Range Nuclear Renaissance Index ETF (NUKZ ) rose 55% last year, more than doubling the gain of many AI-named funds. Nuclear energy demand is expected to grow as more data centers and AI infrastructure come online. While these trends have legs, we are also watching robotics. My eyes are on the ROBO Global Robotics and Automation Index ETF (ROBO ) to see if its 22% gain in 2025 can be topped. As my colleague Rafael Silva noted at VettaFi’s 2026 Market Outlook Symposium, we are finally “giving a physical body to artificial intelligence.”
High Yield: Are Tight Spreads a Deterrent?
Fixed income ETFs gathered a massive $439 billion of net inflows in 2025 as investors continued to gain comfort with the ETF wrapper. Among the larger products, U.S.-focused high yield ETFs were among the strongest performers on a total return basis. The iShares Broad USD High Yield Corporate Bond ETF (USHY ) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG ) rose 8.8% and 8.6%, respectively, in 2025.
High yield credit spreads ended 2025 at historically tight levels due to a strong appetite for risk-taking. Nonetheless, 38% of advisors told VettaFi at the 2026 Market Outlook Symposium that high yield corporate bonds still look relatively attractive. I’m curious to see if this sentiment translates into continued demand. The lower-cost USHY gathered $6.1 billion in 2025, but demand slowed in the second half. Meanwhile, the more institutionally utilized HYG gathered $1.5 billion of its $4.8 billion total in December alone.
We will not have all the answers until mid-March when the Exchange conference kicks off in Las Vegas. However, I will be sure to ask the many advisors I meet there about these topics. I hope you are one of them so please register.
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