Meet the Vanguard Index Fund Beating the S&P 500 in 2026

There are always some sectors outperforming the S&P 500 (SNPINDEX: ^GSPC), just as there are some sectors lagging it. Still, there's value in knowing which ones are leading or lagging at any given time, and how this leadership is changing.

To this end, here's a look at one of the few index-based exchange-traded funds (ETFs) that's not only firmly higher for the year so far, but is also outperforming the Vanguard S&P 500 ETF (NYSEMKT: VOO) year to date. And it's not the one you're probably thinking.

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Not actually surprising

Yes, the Vanguard Energy ETF (NYSEMKT: VDE) is technically this year's big winner, up more than 40% just since the end of 2025. Just take that performance with a grain of salt. Spurred almost entirely by the recent conflict in the Middle East, this strength could fade just as quickly and easily as it took shape.

Far more interesting to strategically minded investors is this year's second-best performing Vanguard exchange-traded fund. That's the Vanguard Utilities ETF (NYSEMKT: VPU), up more than 7% versus the S&P 500's 7% pullback.

Taken aback? It wouldn't be surprising if you were. After all, utility stocks aren't exactly known for dishing out market-beating gains.

Their recent bullish performance, however, actually makes quite a bit of sense in light of everything else happening right now. With the overall market in retreat and potentially poised to continue struggling, investors are seeking out safety. VPU's -- and its underlying U.S. Investable Market Utilities 25/50 Index's -- top holdings like NextEra Energy, Southern Company, Constellation Energy offer that safety simply because consumers and corporations alike keep their electricity turned on even when economic uncertainty is leading everyone to dial back their discretionary spending.

Of course, it also doesn't hurt that the Vanguard Utilities ETF boasts a trailing dividend yield of 2.5%, generating respectable income at a time when most investors will gladly make forward progress however they can.

A solidly bullish case

Obviously there's no guarantee that VPU will continue outperforming the S&P 500 from here. Indeed, it's guaranteed to eventually stop doing so, even if there's no certainty as to when that time might come. If you're not interested in such a defensive holding for the long haul, it may not be worth buying just as a short-term position despite this ETF's dirt cheap expense ratio of only 0.09%.

If there's something telling you growth stocks' market leadership is about to shift to leadership from value names, however, there's an argument to be made for owning a stake in the Vanguard Utilities ETF. Bolstering this bullish argument, by the way, is the ongoing proliferation of artificial intelligence data centers, which will soon require more electricity than the utility industry has the capacity to produce and deliver.

For perspective on the matter, S&P Global expects the United States' artificial intelligence data centers' total power usage to grow from last year's 61.8 gigawatts to 134.4 gigawatts by 2030. That's more than twice the consumption in just five years' time! Although rate-regulated utility companies will need to invest capital to add this capacity, they could still produce incredible growth-like results for the foreseeable future.

James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Constellation Energy, NextEra Energy, S&P Global, and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.