ETFThemes Macro Outlook: Rates, Rotation and Money Flows

February 23, 2026

The ETFThemes universe or almost 400 liquid thematic ETFs is sending a clear message: this is a rate-sensitive, late-cycle market where dispersion is extreme and capital is rotating with purpose.

Macro conditions remain finely balanced. Q4 GDP slowed to +1.4%, core PCE sits at 3.0% year-over-year, and the 10-year Treasury remains anchored in the low-4% range. That yield level is the fulcrum. If it drifts materially higher, equity multiples compress. If it stabilizes or eases modestly, selective risk-taking can resume.

The S&P 500 remains in an uptrend price structure over longer timeframes, but negative momentum divergence (panels 2 & 3) has been developing since October 2025.

Our thematic performance and flow data reflect that tension.

The Real Leadership: Hard Assets and Supply Chains

Over the past three months, the strongest performers in the ETFThemes universe have not been broad Growth proxies. They have been tangible asset and supply-chain exposures:

• SILJ (Silver Miners ETF): +54.8% (3M)
• SLV (Silver ETF): +52.9% (3M)
• KOPX (Copper Miners ETF): +47.2% (3M)
• GDX (Gold Miners ETF): +37.4% (3M)
• URNM (Uranium ETF): +36.6% (3M)

This is not accidental.

The combination of geopolitical risk, tariff escalation, industrial production strength (+0.7% m/m), and persistent services inflation has created a fertile environment for natural resources. Investors are hedging policy uncertainty with real assets.

Energy-linked and nuclear themes have also remained bid, reflecting long-duration capital cycles tied to electrification and geopolitical security.

As long as the 10-year Treasury remains contained near the low-4% level, these resource-heavy themes can continue to outperform. A sharp spike in yields would threaten demand expectations — but stability supports cash flow durability and pricing power.

Thematic takeaway: Natural Resources remains structurally supported, not merely speculative.

The surge in commodities prices has supported rotation towards Value and more purely cyclical exposures at the expense of Growth themes.

AI Anxiety vs. AI Spending: Growth Is Not Broken

The headlines are loud about AI competition fears and capital intensity. OpenAI revised compute spending targets lower than earlier trillion-dollar narratives. Nvidia has been rangebound ahead of earnings. Software dispersion is extreme.

But the performance data tell a more nuanced story.

Semiconductor and hardware exposure remains well bid:

• SMH (Semiconductor ETF): +37% (3M), +$3.3B YTD inflows
• PSI (Semiconductor ETF): +37.5% (3M)

Capital continues to flow into core AI infrastructure vehicles. YTD inflows into SMH alone exceed $3.3B — even amid valuation compression.

The Technology premium has narrowed, but earnings have not collapsed. S&P 500 earnings growth is running above +13% y/y. Industrial production in business equipment rose +0.9% m/m. Manufacturing output saw its largest increase in nearly a year.

The premium is normalizing, not imploding.

If rates remain stable and earnings hold, selective Growth re-risking makes sense — particularly in quality large-cap semis and infrastructure-linked exposures rather than speculative software names vulnerable to disruption narratives.

Thematic takeaway: AI capex remains intact; valuation excess is what has corrected.

Semiconductors remain a core driver of the bull market and, as such, a bellwether for the equity trend and the business cycle.

Income Is Back in the Conversation

One of the more important flow stories is income.

Within the broader universe, capital has flowed into:

• SCHD (Dividend ETF): +$2.2B YTD
• CGDV (Quality Dividend ETF): +$2.3B YTD
• Bond proxies like SGOV (+$5.6B YTD) and VCIT (+$5.2B YTD)

This reinforces a key shift: high-yielding equities are regaining relative appeal.

If the 10-year yield stays near current levels rather than moving materially higher, dividend growth strategies and income-oriented themes become competitive alternatives to fixed income.

Within Energy, midstream and MLP structures (represented broadly across income energy strategies in the universe) offer yields well above Treasuries, supported by contracted cash flows rather than commodity price speculation.

Thematic takeaway: Yield plus durability is becoming attractive again.

Cannabis, Space and Speculative Beta: Dispersion Is Extreme

Thematic beta is alive — but selective.

• MSOS (Cannabis ETF): +40% (3M)
• WEED: +38.7% (3M)
• UFO (Space ETF): +38.8% (3M)
• ROKT (Space/Defense ETF): +37.7% (3M)

These moves reflect idiosyncratic catalysts rather than broad macro conviction. Single-stock dispersion is running near multi-year highs. More than 20% of S&P 500 components have moved +/-20% this year.

This is not a passive market. It is a stock-picker’s and theme-picker’s market.

Defensive Rotation or Buying Growth?

The case for defensives rests on:

• Tariff escalation (10% to 15%)
• Core inflation at 3.0%
• Geopolitical tension around Iran
• Crowded equity positioning

The case for buying oversold Growth rests on:

• +13% earnings growth
• Strong capital goods shipments
• Stable labor market
• Technology valuation premium compressing toward historical norms

The ETFThemes data show investors are not abandoning Growth. They are reallocating within it — toward semis, infrastructure and quality — while simultaneously increasing exposure to real assets and income.

This is not a full defensive pivot. It is a late-cycle rotation toward cash flow visibility.

The Swing Variable: Rates

Rates have remained contained near cycle lows.  A key indicator to watch will be whether investors use this as a cue add or decrease risk.  NVDA earnings on Wednesday is a likely pivot.

Everything returns to the 10-year Treasury.

• If yields remain in the low-4% zone:
  Natural Resources, midstream income and selective Growth can coexist.
• If yields fall because growth cracks:
  That signals impaired risk appetite — defensives win.
• If yields spike higher:
  Multiples compress across sectors, and the income trade weakens.

Right now, the ETFThemes universe suggests a barbell:
Own tangible assets and income durability. Layer in quality Growth where valuation excess has cleared.

This is not a broad risk-on environment. It is a disciplined, rate-sensitive rotation.

And the flows confirm it.

Sources

Macroeconomic Data

1. U.S. Bureau of Economic Analysis (BEA) – Advance Q4 GDP Estimate

2. U.S. Bureau of Economic Analysis (BEA) – Personal Consumption Expenditures (PCE) Price Index

3. U.S. Bureau of Labor Statistics (BLS) – Industrial Production & Manufacturing Output

4. S&P Global – Flash U.S. Manufacturing & Services PMI

5. CME Group – FedWatch Tool (rate expectations)

6. U.S. Department of the Treasury – 10-Year Treasury Yield Data

Earnings & Market Data
7. FactSet Research Systems – S&P 500 Q4 earnings growth (~+13% y/y), sector revisions
8. Bloomberg Intelligence – Single-stock dispersion and volatility metrics
9. Bank of America Global Fund Manager Survey – Positioning data

ETF Performance & Flow Data
10. ETFThemes.com Universe Spreadsheet (as of 20-Feb-2026) – Performance and Fund Flow Data
11. ETF Sponsor Reports (VanEck, State Street, Invesco, Global X, BlackRock) – Fund flows and AUM updates for:

• SMH (VanEck Semiconductor ETF)

• SILJ (ETFMG Silver Miners ETF)

• SLV (iShares Silver Trust)

• KOPX (Global X Copper Miners ETF)

• URNM (Sprott Uranium Miners ETF)

• MSOS (AdvisorShares Pure US Cannabis ETF)

• SCHD (Schwab U.S. Dividend Equity ETF)

• CGDV (Capital Group Dividend Value ETF)