Meet the Unstoppable Vanguard ETF Beats the S&P 500, Nasdaq-100, and Dow Jones by 2026.
The ongoing political tensions in the Middle East have caused fluctuations in oil prices, which have had significant consequences for the global economy. It leads to market volatility in the past few months; however, i S&P 500 (SNPINDEX: ^GSPC)i The Dow Jones Industrial Average (DJINDICES: ^DJI)once The Nasdaq-100 it still holds year-to-date returns of between 1.6% and 7.1%.
I Russell 2000which tracks the performance of about 2,000 of the smallest companies listed on the US stock exchange, is doing even better in 2026 with a year-to-date return of 11.1%. Many of these companies conduct most of their business within the United States, so they are more protected from global risks than the international majors that hold other indexes such as the S&P 500.
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I Vanguard Russell 2000 ETF (NASDAQ: VTWO) is an exchange-traded fund (ETF) that tracks the performance of the Russell 2000 by holding the same stocks. Here’s why it could continue to beat major US indexes through 2026.
Small caps benefit from a number of tailwinds
Companies in the Russell 2000 cover all sectors of the economy, so it’s very diverse. And, while the technology sector alone makes up more than one-third of the value of the S&P 500 and nearly 60% of the Nasdaq-100, Russell away moderate.
Its largest sector is healthcare, with a portfolio weight of 18.7%, followed by industrials at 18.1% and financials at 17.2%. In addition, the top 10 holdings at Russell represent just 5.5% of its portfolio value, so its performance is not determined by just a handful of stocks. In general, an evenly distributed index can produce stronger returns with lower volatility than a more concentrated one.
|
Level/Stock |
Vanguard Russell 2000 ETF Weight |
|---|---|
|
1. Bloom Power |
0.99% |
|
2. Coeur Mining |
0.64% |
|
3. Fabrinet |
0.63% |
|
4. NextPower |
0.59% |
|
5. Company EchoStar Corp |
0.53% |
|
6. Credo Technology |
0.51% |
|
7. Kratos Defense |
0.43% |
|
8. Advanced Energy Industries |
0.41% |
|
9. Sterling infrastructure |
0.41% |
|
10. Hecla Mining |
0.39% |
Data source: Vanguard. Portfolio estimates are accurate as of March 31, 2026, and are subject to change.
Many of these companies operate only in the US, so they are not only restricted by the country’s political environment in terms of instability, but they also benefit from very favorable government policies. The Trump administration continues to reduce regulations to lower the cost of doing business, and has also imposed a series of tariffs on imported goods to make domestic companies more competitive with their global counterparts.
These storms are helping companies like Bloom Energy, which manufactures its clean energy solutions in the US. Rockets increased by 1,100% in the last year alone.
Shares of both Coeur Mining and Hecla Mining have tripled in the past 12 months. They operate in North America, where they explore precious metals, so they have benefited from the recent rise in the price of gold and silver.
Fabrinet’s stock has tripled in the past 12 months amid growing demand for its high-speed networks and networking components for AI data centers. Its clients include trillion-dollar tech powerhouses Nvidia again Amazon.
More upside may be ahead of the Vanguard ETF
Investors who bought the Vanguard Russell 2000 ETF over the past 10 years will be sitting on a solid 143% return. However, they would have done much better if they had invested in the S&P 500, Dow, or Nasdaq-100 instead. So, Russell’s performance in 2026 seems out of the question, but that doesn’t mean it won’t continue.
Russell lacks exposure to tech giants like Nvidia, which leads the market in terms of profits and earnings growth, so it often underperforms other indexes. But those same companies do a large amount of their business overseas, so the growing global uncertainty will remain a problem for them in the remainder of 2026.
Although the US is energy independent, regions such as Europe and Asia still rely on the Middle East for their oil needs, so their consumers and businesses will face higher gas and transportation costs as long as the war in Iran continues. Negative effects can lead to lower spending and slower economic growth, which will affect all companies that draw capital from these regions.
So, I think this is the perfect place for Russell to continue to outshine his greatest peers.
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Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Bloom Energy, Kratos Defense & Security Solutions, Nextpower, Nvidia, and Sterling Infrastructure. The Motley Fool has a policy of disclosure.
Meet the Unstoppable Vanguard ETF Beating the S&P 500, the Nasdaq-100, and the Dow Jones by 2026 was originally published by The Motley Fool.
