Inside ETFs: Small Caps and International Stocks Poised for Growth in 2026

ETF Market Growth in 2025

• 📈 ETFs experienced over 30% growth globally in 2025, nearing $20 trillion in assets.
• 💡 This boom was largely fueled by retail investors and the mainstream adoption of trading apps.
• 🚀 Despite uncertainty, investors maintained a strong appetite for risk assets, particularly large-cap growth and tech stocks.

Fixed Income and Diversification Trends

• 💰 Investors sought diversification through fixed income ETFs, focusing on lower durations (0-3 months up to 1-year maturities) and some exposure to 10-year maturities.
• 💸 Demand for derivative income and options-based income strategies also increased as a way to generate cash and diversify risk.
• 🌟 Assets like gold and even Bitcoin saw continued investment, signaling a move beyond the concentration in large-cap tech.

Rise of Active ETFs

• 📊 A notable trend is the shift towards active ETFs, with over 80% of new launches in 2025 being active funds.
• 🔑 While passive ETFs still dominate in overall assets, active ETFs are capturing significant traction and approximately a third of all asset flows.
• 🚀 This trend is expected to continue into 2026 as new asset managers enter the ETF space.

Opportunities for 2026

• 🎯 Small-cap stocks are anticipated to perform well, having shown signs of picking up pace in late 2025.
• 🌍 International stocks are expected to remain compelling for investors in 2026, following a strong performance in 2025.
• 📈 The value versus growth dynamic is predicted to favor value, and opportunities exist in the middle of the fixed income curve for yield with moderate risk.