Content and data provided by various third parties and Fidelity − Terms of Use | Help/Glossary
Research > ETFs > ETF / ETP Commentary > 

Small-Cap Awakening Sparks This Momentum ETF

BY | ETF Database
11:59 am ET 05/08/26 | 14 VIEWS
Momentum investing is often viewed as a large-cap-only concept. Conversations about its applications via ETFs often lead to products such as the Invesco S&P 500 Momentum ETF (SPMO B). Read more: Nvidia’s New Corning Deal: A Boost for Momentum ETFsThere’s nothing wrong with that. SPMO is effective at doing its job and delivering impressive returns when the momentum factor is in style. But at a time when small-cap stocks are proving quite stylish in their own rights, investors may want to consider the union of smaller stocks and momentum — a task made easy with the Invesco S&P SmallCap Momentum ETF (XSMO B-). XSMO, SPMO’s small-cap cousin, tracks the S&P SmallCap 600® Momentum Index. That gauge posted a double-digit gain in April. As is the case with the other S&P momentum indexes, SPMO’s index is home to stocks displaying high momentum scores. The $2.77 billion ETF is home to 114 stocks, indicating the index is somewhat selective in its inclusion process.Examining XSMO’s MethodologySpeaking of inclusion, advisors and investors should take the time to understand how the XSMO basket is built. “The S&P Momentum Indices typically utilize 12-month risk-adjusted price momentum to select stocks ranked in the top quintile of their eligible universes,” noted S&P Dow Jones Indices. “To account for short-term reversal effects, the most recent month is excluded when calculating price momentum.” Put simply, XSMO’s index relies on risk-adjusted momentum, not a raw variant. That can create a better approach to this factor, because it can limit some of the downside when momentum wanes. XSMO holdings are weighted by a combination of floating market capitalization and momentum scores. “This approach effectively balances market weight with targeted factor exposure. The indices are rebalanced semiannually, with a 20% buffer rule to help reduce turnover,” added S&P. As a result, XSMO allocates no more than 3.90% of its weight to any individual holding. Momentum strategies are typically sector agnostic and that’s true of XSMO. That said, the ETF has to go where the momentum is. In this case, that results in a nearly 42% allocation to industrial and tech stocks, and another 27% of the portfolio directed to financial services and healthcare names. XSMO may also be appropriate for long-term investors; over the trailing year, three, five and 10 years, its index beat the S&P SmallCap 600 Index. “Furthermore, these indices (the S&P momentum gauges) have shown favorable capture ratios, delivering higher or similar gains during up markets and experiencing smaller declines during down markets,” concluded the index provider. For more news, information, and analysis, visit the Innovative ETFs Content Hub.

More Commentary

State Streets Doshi on Gold's Portfolio Use Cases & More
BY | ETF Database
5:02 am ET 05/08/26 | 27 VIEWS
AMD Ascent Could Lure Traders to This ETF
BY | ETF Database
8:58 am ET 05/08/26 | 33 VIEWS
Navigating Manager Selection Risk in Private Credit
BY | ETF Database
7:17 am ET 05/08/26 | 19 VIEWS
View more Commentary

Search Commentary

Enter Keyword(s)
Filter Results

Performance data shown is past performance and is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. Yield and return will vary, therefore you have a gain or loss when you sell your shares. For standard quarterly performance, go to the fund's Snapshot page by clicking on the ETF/ETP's symbol.

ETFs may trade at a premium or discount to their NAV and are subject to the market fluctuations of their underlying investments.

For iShares ETFs, Fidelity receives compensation from the ETF sponsor and/or its affiliates in connection with an exclusive long-term marketing program that includes promotion of iShares ETFs and inclusion of iShares funds in certain FBS platforms and investment programs. Please note, this security will not be marginable for 30 days from the settlement date, at which time it will automatically become eligible for margin collateral. Additional information about the sources, amounts, and terms of compensation can be found in the ETF's prospectus and related documents. Fidelity may add or waive commissions on ETFs without prior notice. BlackRock and iShares are registered trademarks of BlackRock, Inc. and its affiliates.

FBS receives compensation from the fund's advisor or its affiliates in connection with a marketing program that includes the promotion of this security and other ETFs to customers ("Marketing Program"). The Marketing Program creates incentives for FBS to encourage the purchase of certain ETFs. Additional information about the sources, amounts, and terms of compensation is in the ETF's prospectus and related documents. Please note that this security will not be marginable for 30 days from the settlement date, at which time it will automatically become eligible for margin collateral.

News, commentary (including "Related Symbols") and events are from third-party sources unaffiliated with Fidelity. Fidelity does not endorse or adopt their content. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use.

Any data, charts and other information provided on this page are intended to help self-directed investors evaluate exchange traded products (ETPs), including, but limited to exchange traded funds (ETFs) and exchange traded notes (ETNs). Criteria and inputs entered, including the choice to make ETP comparisons, are at the sole discretion of the user and are solely for the convenience of the user. Analyst opinions, ratings and reports are provided by third-parties unaffiliated with Fidelity. All information supplied or obtained from this page is for informational purposes only and should not be considered investment advice or guidance, an offer of or a solicitation of an offer to buy or sell a particular security, or a recommendation or endorsement by Fidelity of any security or investment strategy. Fidelity does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating ETPs. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use. Determine which securities are right for you based on your investment objectives, risk tolerance, financial situation and other individual factors and re-evaluate them on a periodic basis.

Before investing in any exchange traded product, you should consider its investment objective, risks, charges and expenses. Contact Fidelity for a prospectus, offering circular or, if available, a summary prospectus containing this information. Read it carefully.