Top 3 Vanguard Stock ETF Picks for 2026

Core Insights - The tech and AI stocks have performed well, but there are concerns that this rally may soon lose momentum, with gains primarily concentrated in large-cap and growth stocks, leaving value and defensive stocks underperforming in 2025 [1][2][3] Economic Conditions - As 2026 approaches, the economic environment remains favorable for stock gains, with indicators suggesting continued U.S. economic growth, contained inflation, and a low unemployment rate, although some signs indicate a potential rise in unemployment [2][3] Investment Opportunities - Investors are considering diversifying away from tech and AI stocks due to valuation concerns and the search for alternative investments, which may lead to a new set of market leaders in 2026 [3] Vanguard Mid-Cap Value ETF - The Vanguard Mid-Cap Value ETF (VOE) presents an attractive option for investors looking to shift from large-cap and tech stocks, offering a solid growth profile with lower risk compared to small-cap stocks [5][6] - The ETF's largest sector allocations are in industrials (17.4%) and financials (15.1%), which have shown positive performance in 2025, and its P/E ratio of 18 is significantly lower than the S&P 500's 28 [7] Vanguard High Dividend Yield ETF - The Vanguard High Dividend Yield ETF (VYM) may benefit from a resurgence in dividend stocks after years of underperformance, with a selection strategy focused on above-average yielding stocks [9][10] - Key sector allocations include financials (21.1%), technology (14.1%), industrials (13.5%), and healthcare (12.3%), with industrials outperforming the S&P 500 year-to-date [10] Vanguard Emerging Markets ex-China ETF - The Vanguard Emerging Markets ex-China ETF (VEXC) launched recently and is positioned well for international stock potential, with a P/E of 17, approximately 40% lower than the S&P 500 [13] - The exclusion of China is a cautious approach due to ongoing struggles in the manufacturing sector and uncertainties stemming from China's real estate crisis [14] Vanguard Total Stock Market ETF - The Vanguard Total Stock Market ETF (VTI) offers a balanced approach, maintaining large-cap exposure while incorporating mid-cap and small-cap allocations, allowing investors to capture potential in undervalued market areas [17]