2 Vanguard Index Funds to Beat the S&P 500 Over the Next 10 Years, According to Analysts

Core Viewpoint - The S&P 500 has been significantly influenced by a few large-cap growth stocks, achieving total returns of 26%, 25%, and 18% for the years 2023, 2024, and 2025 respectively, but a reversion to the mean is anticipated going forward [1] Group 1: Market Performance - The S&P 500 has reached new all-time highs, yet many other stocks have underperformed [2] - Vanguard analysts predict that small-cap stocks and value stocks will outperform the S&P 500 over the next decade [5] Group 2: Long-term Predictions - Vanguard's Capital Markets Model forecasts annualized returns of 6.2% for small-cap stocks and 6.8% for value stocks, compared to 4.9% for U.S. equities overall and 4.8% for large-cap stocks [5] - Valuations are seen as poor predictors of short-term returns but useful for long-term predictions, suggesting that investors should consider long-term outlooks when making portfolio decisions [4] Group 3: Valuation Insights - The valuation spread between growth stocks and value stocks is at its widest since the dot-com bubble, with a trailing P/E of 39.32 for the Russell 1000 Growth index versus 22.12 for the Russell 1000 Value index [6] - The S&P 500 had a forward P/E of 24 at the end of 2025, while the S&P 600 traded at a 16-times earnings ratio, despite similar earnings growth outlooks [7]