SPMO's Momentum Strategy Navigates Macroeconomic Crosscurrents

Investors seeking to capitalize on sector-specific momentum while navigating geopolitical and macroeconomic risks face a complex landscape. The Invesco S&P 500® Momentum ETF (SPMO) stands out as a tactical tool for those willing to weigh its concentrated exposures against its structural advantages. With a portfolio heavily skewed toward technology (22%) and financials (20%), SPMO's performance hinges on two critical factors: the durability of sector momentum and the resolution of U.S.-China trade tensions. Here's why this ETF could thrive—or stumble—in the months ahead.

The Momentum Play in Tech and Financials

SPMO's top-10 holdings include NVIDIA, Meta Platforms, Amazon, and JPMorgan Chase—companies deeply tied to the twin engines of the U.S. economy: tech innovation and financial services. A key bullish scenario for SPMO unfolds if U.S.-China trade relations improve, lifting tech stocks reliant on global supply chains and cross-border data flows. reveals how geopolitical tailwinds can amplify momentum in this sector. Meanwhile, stable interest rates would favor financials, as banks like JPMorgan benefit from predictable net interest margins.

Rebalancing: A Shield Against Volatility

SPMO's semi-annual rebalancing—occurring in March and September—acts as a self-correcting mechanism. By resetting allocations based on 12-month price performance (excluding the most recent month), the fund avoids overcommitting to fleeting trends. This approach helps mitigate the risk of holding overvalued stocks during corrections, though it also means SPMO may underperform during prolonged rallies in its top holdings. The rebalancing schedule ensures the portfolio remains anchored to the highest-momentum stocks, even as macro conditions shift.

Cost Efficiency as a Competitive Edge

With an expense ratio of 0.13%, SPMO undercuts the average 0.37% fee of its momentum-focused peers. This cost advantage becomes meaningful over time: over a decade, a $10,000 investment would retain $1,400 more compared to a fund charging 0.37%. For investors pursuing tactical allocations, SPMO's affordability reduces the drag on returns, particularly in volatile markets where frequent trading or rebalancing might otherwise eat into profits.

Navigating Geopolitical Crosscurrents

The ETF's resilience hinges on whether U.S.-China trade tensions ease. A thaw in relations could reignite demand for semiconductors (NVIDIA), cloud infrastructure (Amazon), and social media platforms (Meta) that rely on cross-border commerce. Conversely, a prolonged stalemate or escalation would pressure SPMO's tech-heavy exposure. Similarly, interest rate stability is critical for financials: rising rates could boost bank earnings, but persistent volatility might spook investors. offers a real-time gauge of this risk.

Risks and the Case for Defensive Pairings

SPMO's top-10 holdings account for 65% of the portfolio, creating outsized exposure to companies like NVIDIA and Meta. While this concentration can amplify returns during bull markets, it also magnifies downside risk during sector-specific corrections. The fund's standard deviation of 10.42% underscores its volatility relative to the broader market. Investors should pair SPMO with defensive assets—such as the iShares Core U.S. Aggregate Bond ETF (AGG) or the Utilities Select Sector SPDR Fund (XLU)—to balance growth and stability.

Final Take: A Momentum Play with Clear Limits

SPMO is not a set-it-and-forget-it investment. Its success depends on sustained momentum in its top sectors and macro conditions that favor tech and financials. For tactical allocators, the ETF's low cost and semi-annual rebalancing provide a disciplined framework to capitalize on high-flying stocks. However, its concentration risks demand caution: investors should limit SPMO to a portion of their equity allocation and pair it with hedges against sector-specific downturns.

In a world where geopolitical risks and interest rate uncertainty loom large, SPMO offers a way to bet on momentum—but only for those who can stomach the swings.

Data as of June 2025. Past performance does not guarantee future results. Always conduct your own research before making investment decisions.