Play Earnings Growth Momentum With These ETFs

Momentum investing could be poised for a comeback after suffering one of its steepest pullbacks on record, according to Morgan Stanley strategist Michael Wilson, per Bloomberg, as quoted on Yahoo Finance. However, the next phase of gains may be driven by companies with stable earnings rather than the semiconductor stocks that fueled the previous rally.

Strong Earnings Support Bullish Outlook

Wilson expects the improving earnings environment and the S&P 500's higher exposure to quality companies to support further market gains. He also pointed to broader improvements in earnings revisions across sectors, projecting that the index could climb to 8,000 by the year-end after closing at 7,489.72 on Friday.

JPMorgan Chase strategist Mislav Matejka also expects market leadership to continue broadening beyond AI and large-cap technology stocks during the second half of the year, as quoted on the above-mentioned source. However, with semiconductor stocks approaching oversold levels and earnings momentum still improving, he believes the sector is likely to stabilize.

Matejka noted that healthy corporate earnings should continue providing an important foundation for the broader equity market.

Q2 Earnings Scorecard

We are past the halfway mark of the Q2 earnings season, with more than 60% of S&P 500 companies having already reported. With another 27% of the index on deck this week, we will have seen the bulk of Q2 earnings by July 31, 2026.

Through July 31, we have seen quarterly results from 307 S&P 500 members or 61.4% of the index’s total membership. Total earnings for these companies are up 46.7% from the same period last year on 14.7% revenue gains, with 83.1% of the companies beating EPS estimates and 76.2% of them beating revenue estimates.

Looking at Q2, total S&P 500 earnings are currently expected to be up 39.7% from the same period last year on 12.6% higher revenues, with 13 of the 16 Zacks sectors expected to enjoy positive earnings growth, per the Earnings Trends issued on July 29, 2026.

What Lies Ahead of 2026 As a Whole?

For 2026 Q3, total S&P 500 earnings are currently expected to be up 21.8% from the same period last year on 10.4% higher revenues, with earnings estimates modestly moving higher since the start of the quarter. 

Looking at the calendar year picture, total S&P 500 earnings are expected to grow by 25.6% in 2026, with the growth pace dropping to 13.4% when the Tech sector’s contribution is excluded, per the above-mentioned Earnings Trends. 

Winning Sector ETFs in Focus

Information Technology – Roundhill Magnificent Seven ETF MAGS

The information technology sector currently revolves around the AI boom, which is driven mainly by the “Magnificent Seven” stocks. Total Tech sector earnings are expected to grow 91.4% in Q2 on 28.9% higher revenues.

Energy – State Street Energy Select Sector SPDR ETF XLE

A significant portion of the earnings upgrade momentum of the S&P 500 has come from the Energy sector this time around. The Middle East crisis has made the sector a rising star. The Energy sector is expected to post 127.7% earnings growth in Q2 2026 on 16.9% higher revenues.

Basic Materials – State Street Materials Select Sector SPDR ETF XLB

The Basic Materials sector is expected to post 49.7% earnings growth in Q2 2026 on 17.1% higher revenues. Basic materials stocks have been surging in 2026 due to a combination of higher commodity prices, strong infrastructure demand, AI-related investment and geopolitical disruptions.

Utilities – State Street Utilities Select Sector SPDR ETF XLU

For the second quarter of 2026, the sector is likely to log 10.2% earnings growth over 6% revenue expansion. As a low-beta sector, utilities are relatively shielded from market volatility, making them a defensive investment and a safe haven during economic turmoil. Investors often turn to utilities during downturns due to the steady demand for these companies' services (read: Too Much Tech in Your Portfolio? ETFs to Help You Diversify).

Finance – State Street SPDR S&P Bank ETF KBE

The sector is expected to post 22.9% earnings growth in Q2 2026 on 12% higher revenues. Strong loan growth, resilient trading activity and stable investment banking trends should support results.

Aerospace – iShares U.S. Aerospace & Defense ETF ITA

The aerospace sector is expected to post 15% earnings growth in Q2 2026 on 11.2% higher revenues. The aerospace sector has been a clear winner from the ongoing geopolitical crisis and the demand for aerospace- and defense-related equipment and services.

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This article originally published on Zacks Investment Research (zacks.com).

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Source Zacks-com