Stop me if you’ve heard this before: Exchange-traded funds enjoyed another banner year. Strong markets and relentless inflows continued to raise the bar for ETFs. ETFs collected over $1 trillion in new money for the second straight year, and assets swelled to more than $13 trillion. Product development also ramped up, with over 1,100 new ETFs launched last year alone, by far a record. But several other important and emerging developments lie beneath those headlines:
- Invesco restructured QQQ, unlocking potentially millions in revenue from its largest ETF.
- Active ETFs continued their ascent, as investors piled into a flurry of new products.
- Gold ETFs surged and bitcoin ETFs slumped.
- ETF share classes became reality. Dimensional earned the first stamp of approval.
- Private market ETFs also arrived, but to limited interest.
- (Almost) guaranteed income?
Those are just a few of the many notable ETF stories from 2025, and 2026 is sure to be filled with surprises. Just like this time last year, each member of Morningstar’s ETF research team offers their predictions for what ETF investors can expect in 2026.
In order from most likely to least likely, here are our 2026 predictions. (Scroll to the bottom of the page to see how our 2025 predictions fared.)
Prediction 1: Bond ETFs Take 33% Market Share
Asset managers launched 149 bond ETFs in 2025, and they’ve been slowly taking market share from mutual funds for the past decade. Money in bond ETFs represented 29.6% of all money invested in bond funds or ETFs at the end of November. That’s almost 20 percentage points more than the 10.2% bond ETFs represented at the end of November 2015, shown below.
Said another way, bond ETFs reliably gain about 2 percentage points of market share each year on average. They gained share even in years when bonds performed poorly. Bond ETFs took 4 percentage points of market share away from mutual funds in 2022 when just about every bond mutual fund and ETF declined in value.
An average year means bond ETFs should wind up with about 32% market share by the end of 2026. With more bond ETFs than ever, and more on the way, I think they’ll have an above-average year and claim one-third of the entire bond-fund market by the end of 2026.
-Daniel Sotiroff
Read more: Bond ETFs Are Having a Moment
Prediction 2: Cashlike ETFs to See Record Inflows
Cash will be king in 2026. Assets flowed into cashlike ETFs at an impressive rate in 2025, collecting over $100 billion, but this year is likely to eclipse that. As bank-offered interest rates remain very low and bond yields are still relatively high, investors will continue to demand more from their savings, bringing many into short-term bond ETFs. All are easy and quick to trade with a modestly higher yield. I expect the popularity of these types of ETFs to soar in 2026 for two main reasons.
First, US stocks are overvalued by just about every metric, causing investors to seek shelter in safer assets. Only twice in the last 30 years have valuations been this stretched: preceding the dot-com bubble in 1999 and again in 2021 before rates rose and markets tumbled. History shows that valuations near current levels can be perilous, compelling many investors to protect their portfolios with relatively safe, cashlike ETFs.
Second, feelings of economic instability and uncertainty are hard to shake heading into 2026. Despite positive economic growth in 2025, hiring has slowed and layoffs reached their highest level since the pandemic. Some blame artificial intelligence, some blame tariffs—but no matter the cause, any unease increases the appeal of highly stable and cashlike ETFs.
-Brian Paoli
Prediction 3: Discretionary Active ETFs Will Finally Proliferate
The ETF market, once synonymous with passive investing, saw nearly 1,000 active ETFs launched in 2025. While true by traditional definitions—funds that track an index are “passive,” those that don’t are “active”—this year’s rookie class of ETFs looks unrecognizable to old-school stock and bond pickers. More than half of new ETFs focused on single-stock strategies, systematic options strategies, or crypto.
I expect discretionary active managers to finally have their ETF moment in 2026. The key factor is the Security and Exchange Commission’s approval of the first active ETF share classes, with over 30 asset managers getting the green light to add an ETF to their mutual funds. This dual share class structure lets investors exchange existing mutual fund shares for ETF shares and choose between a mutual fund and ETF for the same strategy going forward. While the differences between the two types of share classes will be minimal, the potential migration of assets into ETFs could be substantial.
ETF share classes will begin launching in 2026, giving ETF investors access to leading discretionary active mutual fund strategies. Expect ETFs to gain significant ground on mutual fund assets in the coming years, starting with a wave of discretionary active ETF launches this year.
-Bryan Armour
Prediction 4: AI Mania Revives Thematic ETFs
Artificial intelligence seemingly touched every corner of the market in 2025, and soon we’ll also see a surge in thematic AI ETF launches and inflows. Thematic ETFs targeting technology themes collected $10.6 billion in 2025 and finished the year with over $55 billion in total assets. This bucks a three-year trend of outflows. ETF providers responded to this renewed demand by launching 14 thematic technology ETFs last year, with most targeting the subtheme of Artificial Intelligence + Big Data.
While the rising tides of late 2020 and 2021 lifted most thematic technology ETFs, recent inflows have concentrated in a few AI-related subthemes. The biggest thematic winners of 2025 were ETFs in the Artificial Intelligence + Big Data subtheme, collecting over $8 billion in new money. Subthemes unrelated to AI continued to see outflows.
The divergence is expected. As the broader technology theme matures, investors have a clearer view into the industries and companies that will benefit most from AI. Because of this, robust demand for AI-related thematic ETFs should continue in 2026 alongside numerous fresh launches.
-Lan Anh Tran
Prediction 5: A Fifth of Trading Tool ETFs Will Close
ETF providers launched more than 1,100 new ETFs in 2026. Nearly a third of those are classified as “trading tools.” These risky ETFs seek to deliver leveraged or inverse exposure to the short-term returns of an index, stock, or cryptocurrency.
There are now roughly 600 trading tool ETFs available to US investors, with around half of those spawned in 2025 alone. Nearly all of those new listings aim to replicate the leveraged performance of a single stock or even a cryptocurrency. These hyperspecific ETFs ratchet up the risk of the average trading tool ETF because single stocks, and especially single cryptocurrencies, are more prone to experiencing wider price swings than broad indexes like the S&P 500 or Nasdaq 100. Such narrow ETFs can collapse when markets move quickly and unexpectedly against them. This happened during 2020’s steep market drop, when nearly 30% of trading tool ETFs closed.
It doesn’t take much to spell trouble for this risky cohort. If markets move quickly against these ETFs in 2026, widespread closures are likely to follow.
-Brendan McCann
Read: The Best and Worst ETFs of 2025
Prediction 6: Structured Note ETFs to Have a Breakout Year
Structured note ETFs have mostly flown under the radar aside from a few defined outcome, or “buffer,” ETFs. This year may be their breakout campaign. In 2026, we’ll see numerous structured note ETF launches and record inflows into these once-novel, yet complex ETFs.
Investors can find just about any exposure they want in ETFs these days. Many new ETFs use derivatives including options and swaps to amplify exposure to a certain asset or asset class, but there’s a quieter cohort of new ETFs that use derivatives to generate other types of outcomes. This growing cohort includes buffer ETFs, which use call and put options to limit downside and upside on an index such as the S&P 500.
Beyond buffer ETFs are a new breed of outcome-oriented ETFs that pledge to offer some other kind of defined outcome using derivatives. It might be consistent income, positive returns in up or down markets, or something else. Structured notes have long been a way to achieve these unconventional outcomes from an investment, but many ETFs now deliver the same exposures as some structured notes. ETFs are easier to access and are often cheaper than structured notes, too, so as more come to market, I expect more structured note buyers to make the switch.
-Zachary Evens
ETF Investing Takeaways
The future is unknowable, so predicting it is impossible. Speculation is fun, though, and it makes investors take stock of possible outcomes.
These predictions are not intended to serve as an ETF doctrine or cause you to suddenly change course. Instead, they’re intended to highlight some areas, themes, or trends that investors should be aware of going into 2026.
What plays out may rhyme with our predictions, but exact accuracy is unlikely. Take each with a grain of salt, but keep an eye out for topics and themes noted in each. You’ll be surprised by what you might notice.
Read more: Morningstar’s 2026 Outlook
Morningstar’s 2025 ETF Predictions
Prediction 1: Active ETFs Outnumber Passive ETFs
Result: The number of active ETFs surpassed the number of passive ETFs in June 2025. There were 2,187 passive ETFs and 2,741 active ETFs available by year-end.
Prediction 2: ETF Closures Remain High
Result: 221 ETFs shut down in 2025, almost identical to 2024’s tally of 220 closures.
Prediction 3: Single-Stock ETFs Multiply
Result: Of the 397 single-stock ETFs available at year-end, 296 were launched in 2025.
Prediction 4: Vanguard’s VOO Overtakes State Street’s SPY as World’s Largest ETF
Result: Vanguard S&P 500 ETF VOO overtook SPDR S&P 500 ETF SPY as the world’s largest in February 2025.
Prediction 5: ETF Share Classes Become Reality … but Stand-Alone Active ETFs Remain on Top
Result: ETF share classes were formally approved for Dimensional in October. Stand-alone active ETFs remain on top for now.
Prediction 6: ETFs’ Main Drawback Rears Its Head
Result: There were no highly visible capacity issues in 2025, and the ETF-to-mutual-fund migration hasn’t slowed.
6 ETF Investing Predictions for 2025Our 2025 ETF Predictions: A Midyear Review
