The SPDR S&P 500 ETF Trust (NYSEARCA:SPY) returned 17.72% for all of 2025, dividends included. An ETF called the Procure Space ETF (NASDAQ:UFO) returned 66.36% in the same time period, more than 3 times more than the SPY. I believe this ETF can repeat its performance in 2026 despite already performing so well, as the structural tailwinds are likely to keep carrying it higher.
The S&P 500’s performance in 2025 marked yet another blockbuster year after performing well in both 2023 and 2024. Many analysts thought that double-digit gains for a third straight year would be too unlikely, but the market ended up proving them wrong. 2026 is off to a great start for the S&P as well, though a correction is certainly overdue at this stage.
But can the market prove bears wrong yet again? It’s certainly possible as the Federal Reserve is likely to keep cutting rates this year. Jerome Powell is out in 2026, and he will be replaced by a Trump appointee. Thus, this may give the market a looser-than-expected setup, especially if the president is unwilling to let the stock market go down no matter what.
If something like this happens, I expect the UFO ETF to repeat its tremendous 2025 performance. It’s not just monetary policy, though.
Why the Procure Space ETF (UFO) will do well long-term
UFO tracks premier space startups that were neglected by the market years ago but are now coming into the spotlight. The space economy is growing faster than ever, and this growth is built to last since it is no longer just government-funded NASA money made to quench curiosity. Companies are actually finding space profitable.
McKinsey expects the space economy to reach $1.8 trillion by 2035. Orbital launches by year have exploded from just 102 in 2019 to 324 in 2025. In fact, the 2020s have already crossed 1250 launches in total, which puts it just above the 1233 launches during the 1970s space race peak.
Stocks held by this ETF are the ones growing the fastest and are still small enough to deliver multibagger returns. Planet Labs (NYSE:PL) is the largest holding at 6.47%, followed by Rocket Lab (NASDAQ:RKLB), and AST SpaceMobile (NASDAQ:ASTS) at 5.35%.
Why I expect a blockbuster repeat in 2026
Aside from the obvious market forces that can take this ETF higher, there’s something else that I believe can drive explosive growth for all these space stocks.
SpaceX is planning a $1.5 trillion IPO “sometime in 2026”. If we look at betting odds, the market puts a 55% chance of this happening halfway through the year.
Once SpaceX becomes publicly traded, it will turn into the benchmark for all space stocks. Wall Street is willing to pay a triple-digit forward earnings premium for a maturing, controversial electric vehicle company, such as Tesla (NASDAQ:TSLA), due to Elon Musk and his promises. I believe the Street will pay a truly ungodly premium for SpaceX, something that will likely surpass the numbers you see with Palantir (NASDAQ:PLTR).
This serves as the perfect catalyst for the UFO ETF to do well in 2026.
It’s not just private companies investing in space
Even if the SpaceX IPO does not happen and the stock market starts to plateau this year, I wouldn’t turn away from UFO. The space economy is here to stay. And while the government is neglecting agencies like NASA, it is not at all neglecting space.
You’ve likely heard of the Golden Dome project, something that President Donald Trump has been pushing for. It involves spending some $831 billion over two decades. That estimate is likely to prove conservative, but even half of that amount will supercharge the startups held by the Procure Space ETF. Government money meant for defense is an ultra-sticky source of high-margin revenue. You can look back at Palantir for how much the market loves companies that can woo DoD money.
In short, UFO remains a solid buy in my book.