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Are You Doubting Santa Rally? 4 Low P/E Momentum ETFs to Play
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Key Takeaways
AI overvaluation and correction fears are making investors cautious about a traditional Santa Rally.
Sticky inflation lowers odds of faster rate cuts in 2026, limiting risk appetite into year-end.
Low P/E momentum ETFs like XMVM, XSVM, PYZ, and VAMO balance value with short-term upside.
As the year wraps up, investors started debating whether the much-talked-about Santa Claus Rally will materialize. Historically, equities tend to perform well during the final trading days of December and the early part of January. But with lingering macro uncertainties — ranging from the Fed’s interest-rate policy to overvaluation concerns in the artificial intelligence (AI) space —many investors remain cautious.
AI Overvaluation Concerns
Investors remained wary about stretched valuations in the U.S. tech sector. Goldman Sachs and Morgan Stanley talked about a potential 10-20% market correction, last month. Despite rising AI investments on tech balance sheets, doubts linger over whether these outlays will translate into profits, per an article published on aa.com.
Goldman Sachs CEO David Solomon noted recently that equity markets could see a 10-20% pullback over the next 12 to 24 months, as quoted on the above-mentioned source. While many analysts believe that the AI bubble is not likely to burst soon, investors’ dilemma remains.
Inflation Worries Remain in Place
The Fed is still far from achieving its 2% inflation goal. While the U.S. inflation pressures eased in November, the Consumer Price Index (CPI) still rose 2.7% year over year. The Fed’s preferred gauge — the personal consumption expenditures price index — rose 2.8% in September.
The PCE reading matched expectations but was up 0.1 percentage point from August, as quoted on CNBC. This lowers the chances of faster rate cuts in 2026 and may keep investors away from participating in the Santa Rally wholeheartedly.
What About Low P/E Momentum ETFs?
Due to the above-mentioned worries, we suggest tipping toes into momentum ETFs with a relatively low P/E. Momentum investing is an intriguing idea for those seeking higher returns in a short spell. Momentum investing looks to reflect profits from buying stocks that are sizzling on the market.
Investors should note that the U.S. economy has recently delivered a set of upbeat data points. University of Michigan data showed consumer sentiment edged up in December to 52.9, although the index remains 28.5% below from the year-ago level.
Meanwhile, housing sales rose for a third straight month in November, though 2025 transactions are still on track to end at a 30-year low (as quoted on a Yahoo Finance article). These improving indicators may help fuel momentum investing.
ETF Picks
Below, we highlight three momentum stocks and exchange-traded funds (ETFs) with a low P/E to watch out for in the coming trading sessions. The below-mentioned ETFs and stocks have a P/E more or less the 29.00 times P/E of SPY as of Dec. 19, 2025 (per Guru Focus). The ETF SPY has gained 4.3% over the past month (as of Dec. 19, 2025).
Invesco S&P MidCap Value with Momentum ETF (XMVM - Free Report) – P/E: 10.73X (per Guru Focus); One-Month Return: +10.8%
The underlying S&P Mid-Cap 400 High Momentum Value Index is composed of securities with strong value characteristics selected from the Russell Midcap Index. The fund charges 39 bps in fees.
Invesco S&P SmallCap Value with Momentum ETF (XSVM - Free Report) – P/E: 10.92X; One-Month Return: +10.6%
The underlying S&P 600 High Momentum Value Index is composed of securities with strong value characteristics selected from the Russell 2000 Index. The fund charges 37 bps in fees.
The Dorsey Wright Basic Materials Technical Leaders Index identifies companies that show relative strength and are composed of at least 30 common stocks from a universe of approximately 3,000 common stocks traded on US exchanges. The fund charges 60 bps in fees.
The Cambria Value and Momentum ETF seeks to preserve and grow capital from investments in the U.S. equity markets by investing in 100 stocks with market caps greater than US $200 million. The fund charges 65 bps in fees.
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Are You Doubting Santa Rally? 4 Low P/E Momentum ETFs to Play
Key Takeaways
As the year wraps up, investors started debating whether the much-talked-about Santa Claus Rally will materialize. Historically, equities tend to perform well during the final trading days of December and the early part of January. But with lingering macro uncertainties — ranging from the Fed’s interest-rate policy to overvaluation concerns in the artificial intelligence (AI) space —many investors remain cautious.
AI Overvaluation Concerns
Investors remained wary about stretched valuations in the U.S. tech sector. Goldman Sachs and Morgan Stanley talked about a potential 10-20% market correction, last month. Despite rising AI investments on tech balance sheets, doubts linger over whether these outlays will translate into profits, per an article published on aa.com.
Goldman Sachs CEO David Solomon noted recently that equity markets could see a 10-20% pullback over the next 12 to 24 months, as quoted on the above-mentioned source. While many analysts believe that the AI bubble is not likely to burst soon, investors’ dilemma remains.
Inflation Worries Remain in Place
The Fed is still far from achieving its 2% inflation goal. While the U.S. inflation pressures eased in November, the Consumer Price Index (CPI) still rose 2.7% year over year. The Fed’s preferred gauge — the personal consumption expenditures price index — rose 2.8% in September.
The PCE reading matched expectations but was up 0.1 percentage point from August, as quoted on CNBC. This lowers the chances of faster rate cuts in 2026 and may keep investors away from participating in the Santa Rally wholeheartedly.
What About Low P/E Momentum ETFs?
Due to the above-mentioned worries, we suggest tipping toes into momentum ETFs with a relatively low P/E. Momentum investing is an intriguing idea for those seeking higher returns in a short spell. Momentum investing looks to reflect profits from buying stocks that are sizzling on the market.
Investors should note that the U.S. economy has recently delivered a set of upbeat data points. University of Michigan data showed consumer sentiment edged up in December to 52.9, although the index remains 28.5% below from the year-ago level.
Meanwhile, housing sales rose for a third straight month in November, though 2025 transactions are still on track to end at a 30-year low (as quoted on a Yahoo Finance article). These improving indicators may help fuel momentum investing.
ETF Picks
Below, we highlight three momentum stocks and exchange-traded funds (ETFs) with a low P/E to watch out for in the coming trading sessions. The below-mentioned ETFs and stocks have a P/E more or less the 29.00 times P/E of SPY as of Dec. 19, 2025 (per Guru Focus). The ETF SPY has gained 4.3% over the past month (as of Dec. 19, 2025).
Invesco S&P MidCap Value with Momentum ETF (XMVM - Free Report) – P/E: 10.73X (per Guru Focus); One-Month Return: +10.8%
The underlying S&P Mid-Cap 400 High Momentum Value Index is composed of securities with strong value characteristics selected from the Russell Midcap Index. The fund charges 39 bps in fees.
Invesco S&P SmallCap Value with Momentum ETF (XSVM - Free Report) – P/E: 10.92X; One-Month Return: +10.6%
The underlying S&P 600 High Momentum Value Index is composed of securities with strong value characteristics selected from the Russell 2000 Index. The fund charges 37 bps in fees.
Invesco Dorsey Wright Basic Materials Momentum ETF (PYZ - Free Report) – P/E: 25.53X; One-Month Return: +11.2%
The Dorsey Wright Basic Materials Technical Leaders Index identifies companies that show relative strength and are composed of at least 30 common stocks from a universe of approximately 3,000 common stocks traded on US exchanges. The fund charges 60 bps in fees.
Cambria Value & Momentum ETF (VAMO - Free Report) – P/E: 13.92X; One-Month Return: +7.1%
The Cambria Value and Momentum ETF seeks to preserve and grow capital from investments in the U.S. equity markets by investing in 100 stocks with market caps greater than US $200 million. The fund charges 65 bps in fees.