In this episode of ETF Spotlight, I speak with Matthew Bartolini, Managing Director and Global Head of Research Strategists at State Street Investment Management, about the market outlook and the best investing strategies for the second half of 2026.
State Street believes the multiyear rally in risk assets remains intact, supported by strong economic and corporate fundamentals. Matt recommends that investors stay focused on those fundamentals rather than reacting to alarming headlines.
To benefit from the next phase of AI-driven growth and economic transformation, Matt suggests investors look beyond U.S. mega-cap technology stocks and consider opportunities in AI infrastructure and deployment, defense stocks, U.S. small caps, and emerging market equities.
Defense ETFs such as the SPDR S&P Aerospace & Defense ETF XAR and iShares U.S. Aerospace & Defense ETF ITA could benefit from rising defense spending as governments rebuild military capabilities and invest in advanced technologies.
U.S. small-cap stocks may also benefit from reshoring, infrastructure spending, domestic manufacturing trends, and attractive valuations relative to large caps. ETFs such as the State Street SPDR Portfolio S&P 600 Small Cap ETF SPSM and Vanguard Small-Cap Index Fund ETF Shares VB are worth considering.
Emerging markets are supported by faster economic growth, favorable demographics, and their critical roles in AI and semiconductor ecosystems. Investors may want to consider the State Street SPDR Portfolio Emerging Markets ETF SPEM and iShares Core MSCI Emerging Markets ETF IEMG. Taiwan Semiconductor TSM is the top holding in both ETFs.
Tune in to the podcast to learn more.
Make sure to be on the lookout for the next edition of the ETF Spotlight and remember to subscribe! If you have any comments or questions, please email podcast@zacks.com.
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Taiwan Semiconductor Manufacturing Company Ltd. (TSM): Free Stock Analysis Report
iShares U.S. Aerospace & Defense ETF (ITA): ETF Research Reports
State Street SPDR S&P Aerospace & Defense ETF (XAR): ETF Research Reports
iShares Core MSCI Emerging Markets ETF (IEMG): ETF Research Reports
Vanguard Small-Cap Index Fund ETF Shares (VB): ETF Research Reports
State Street SPDR Portfolio Emerging Markets ETF (SPEM): ETF Research Reports
State Street SPDR Portfolio S&P 600 Small Cap ETF (SPSM): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).