2026 has included a major rotation away from the mega-cap tech stocks that led the market for years. With the economy showing signs of slowing and the labor market weakening, investors took a meaningful step toward establishing more defensive positioning within equities.
Sectors that have long underperformed, such as consumer staples and materials, have already delivered big returns this year. Value, low volatility, and small-cap stocks have also been beating the S&P 500 (^GSPC +1.20%).
If you’re still focused on tech and growth stocks, you’re probably leaving some gains on the table. These Vanguard ETFs have all turned it around in 2026 to lead the market higher.
Image source: Getty Images.
Key takeaways
- The S&P 500 is up about 3% year to date, but seven of the 11 S&P sectors are outperforming the index.
- Iran effectively closing the Strait of Hormuz has disrupted roughly 20% of global oil supplies, triggering a sharp rally in energy stocks.
- Consumer staples and value stocks have benefited from a different shift: investors rotating away from expensive growth stocks and into cyclical and defensive equities.
- All three ETFs have tailwinds that could keep them outperforming through the remainder of 2026.
ETF comparison table
| Metric | Vanguard Energy ETF (VDE) | Vanguard Consumer Staples ETF (VDC) | Vanguard Mega Cap Value ETF (MGV) |
|---|---|---|---|
| 2026 YTD return | +28.5% | +6.4% | +6.3% |
| Expense ratio | 0.09% | 0.09% | 0.05% |
| Dividend yield | 2.3% | 2.2% | 2% |
| 10-year beta | 1.02 | 0.98 | 0.91 |
| # holdings | 106 | 104 | 120 |
| Primary driver | Geopolitical shock | Defensive demand | Value rotation |
| Risk profile | High | Moderate | Moderate |
Data source: Vanguard.
1. Vanguard Energy ETF
The Vanguard Energy ETF (VDE 3.02%) is up nearly 30% year to date as the Iran war wreaks havoc on the oil market. The biggest reason is that higher oil prices generate larger margins for the companies in all points along the stream. With no clear endpoint to the Iran war in sight, energy prices could remain high well into the second half of 2026. Even if a resolution is reached, it could take a while for prices to fall back down to where they were pre-conflict.
But geopolitical events tend to be tenuous and unpredictable. If oil prices shoot higher because of the war, they could come right back down once a resolution is achieved. That means there’s risk that the energy sector’s rally this year could reverse quickly. It doesn’t look like that’s happening soon, though. Energy stocks could remain a leader.
2. Vanguard Consumer Staples ETF
When conditions start to deteriorate, investors become less willing to pay premium prices for growth stocks. That has happened this year, where price-to-earnings (P/E) ratios on tech stocks have shrunk even though earnings growth has remained strong. Instead, investors have favored more value-oriented defensive stocks.
The Vanguard Consumer Staples ETF (VDC +1.41%) doesn’t offer the most exciting portfolio in the world, but it does serve a purpose when people are seeking out safety. That’s exactly what happened in 2026 as principal protection took on a little more importance. If the U.S. economy continues to show signs of slowing, I’d expect consumer staples stocks to remain in high demand. They may not produce gains while the market is declining, but there’s a good chance they’ll lose less.
3. Vanguard Mega Cap Value ETF
It probably goes without saying that value stocks haven’t been in favor for some time — certainly not when the artificial intelligence (AI) trade was booming. But once the boom period showed signs of peaking and investors began to question whether all that investment in development would ultimately be worth it, the door opened for a rotation into value. That’s exactly what happened.
The Vanguard Mega Cap Value ETF (MGV +0.82%) is beating the S&P 500 by about 4% year to date on that rotation back into more defensive areas of the market. Trading at a forward P/E of 17, this portfolio is more expensive than its historical average. But it’s much less expensive than the rest of the market. That can play very well when investors seek out safety and durability.