Vanguard highlights the 2 best stock investments for next 5-10 years

Core Viewpoint - Vanguard identifies value stocks and non-US developed market stocks as the top equity investments for the next five to ten years, moving away from the high-flying tech sector that has dominated recent market performance [1][2]. Investment Outlook - Vanguard's 2026 outlook report predicts US value stocks will yield an annual return of 7% over the next decade, while non-US developed market stocks are expected to return 6% per year [2]. - Non-US developed market stocks, which include countries like the UK, Japan, and Germany, have significantly outperformed US stocks, with a 30.3% increase in the Vanguard Tax Managed Fund FTSE Developed Markets ETF (VEA) compared to a 15% gain in the S&P 500 [6]. Sector Analysis - The report suggests that value-oriented sectors such as industrials, financials, and select consumer segments are better positioned to benefit from AI adoption, potentially leading to efficiency gains and earnings growth [4]. - Vanguard notes that both value stocks and non-US developed market stocks have not fully priced in the long-term benefits of AI, making them attractive investments [4]. Market Trends - A rotation towards value and non-US stocks is currently observed, with the Vanguard S&P 500 Value ETF (VOOV) and VEA increasing by 2.7% and 1.6% respectively, while the Vanguard Information Technology Index Fund ETF (VGT) has decreased by 1.4% [5]. - Vanguard acknowledges the ongoing AI investment cycle is only 30%-40% towards its peak, indicating potential risks for tech stocks amid growing competition and capital expenditure pressures [6][7]. Investment Vehicles - For investors interested in US value stocks and non-US developed market stocks, recommended funds include the iShares Core S&P US Value ETF (IUSV) and the Schwab International Equity ETF (SCHF), in addition to Vanguard's offerings [8].