Prediction: This ETF Will Beat the SPY Through 2027 (Not the QQQ!)
One S&P 500-based ETF has quietly been outpacing both the SPY and the QQQ year after year, and the structural reason behind its edge suggests the run is far from over.
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The SPY (NYSEARCA:SPY) has been the gold-standard investment, and beating it in a single year is an achievement that will put you ahead of most financial analysts. However, there’s now an ETF that is actively surpassing it year after year, and there’s enough momentum within it to cause it to soar through 2027.
The ETF is based on the S&P 500 itself and is called the Invesco S&P 500 Momentum ETF (NYSEARCA:SPMO). SPMO has gained 150% in just the past three years and continues to outperform, as current unique circumstances are fitting it quite well.
Let’s look into why.
Far more dynamic than most ETFs
Most ETFs have rigid rules, which makes their holdings just as rigid. For example, in early 2026, investors were amazed by the Magnificent 7’s performance in the years leading up to it and were convinced this was the best way to play AI. Many of them went all in on Mag 7-themed ETFs, only to end up trailing the S&P 500 for most of the year as the rally shifted toward data centers and the like.
Year-to-date, the SPY has delivered almost double the gains of the MAGS ETF (BATS:MAGS).
And SPMO has delivered double the gains of the SPY YTD, and it did so by being dynamic. The ETF has a semi-annual refresh in which the top 100 S&P 500 stocks by price performance are added or remain in its holdings. It can lead to massive shifts where roughly 40 or more companies are completely replaced in one go.
And it is surprisingly resilient
One of the first things that springs to mind when someone talks about a high-risk, high-reward AI ETF is the risk. When it comes to SPMO, there’s no sugarcoating that there’s risk, but it also deserves praise for how well it has held up during each crash. In fact, the past few years have shown that the S&P 500 slides more to the downside during each downturn than SPMO, despite SPMO always outperforming it when the market bounces back.
No other passive ETFs have shown a tendency to do that. Most of them don’t factor in momentum and are tied to a certain sector, so when the tailwinds behind a sector start to fade, so does the ETF.
Thus, there’s a fair chance that SPMO could continue being resilient going forward. It helps that the ETF rebalances infrequently enough to capture all the gains, yet often enough to let those holdings go as the AI rally shifts elsewhere. The “rhythm” of the rally has lined up perfectly with SPMO’s rebalancings over the past few years.
Why I wouldn’t move all my money to SPMO just yet
An ETF that doubles your S&P 500 gains and lessens your risk, all in one package? Who wouldn’t want that?
If you’re underweight on it, you’ll certainly want it, but I’d refrain from putting all my eggs in this basket.
There are some pitfalls to investing in this ETF, and the most dangerous is a freak crash in which all the momentum stocks it holds are hit. For instance, if memory and data center stocks were to plunge significantly all at once, this ETF will have to wait until its next rebalance to exit those holdings and move into the new best performers.
That said, this pitfall applies to most major ETFs in the market today, including the S&P 500. SPMO is not super top-heavy in comparison, but I still wouldn’t shift holdings into a momentum formula just because it worked for the past few years. That sort of thinking is what caused the Mag 7 crowd to underperform this year. I’d only use SPMO as a satellite holding to amplify your AI gains.
Contact [email protected] for any questions or corrections.
Omor Ibne Ehsan is a writer at 24/7 Wall St. He is a self-taught investor with a focus on growth and cyclical stocks that have strong fundamentals, value, and long-term potential. He also has an interest in high-risk, high-reward investments such as cryptocurrencies and penny stocks.
