Stock Market Sell-Off: Meet the Unstoppable Vanguard ETF Obliterating the S&P 500 in 2026

Growth stocks are known for delivering high capital returns, because the underlying companies typically increase their revenue and earnings at a lightning-fast pace. Many of the companies driving the artificial intelligence (AI) boom fall squarely into the growth category.

Then there are value stocks, which typically generate more modest returns, but often provide shareholders with an income stream in the form of regular dividend payments. The Vanguard Morningstar Value ETF (NYSEMKT: VTV) is an exchange-traded fund (ETF) that exclusively invests in America's largest value stocks, and it's having a great year in 2026.

The ETF has delivered a return of 17.2% so far (as of the market close on Nov. 5), obliterating the benchmark S&P 500 (SNPINDEX: ^GSPC) index, which is sitting on a gain of 7.4%. The S&P has over three times as much exposure to the growth-heavy technology sector, which is in the throes of a sharp correction right now as investors worry about the sustainability of the AI infrastructure spending boom.

Can value continue outperforming growth?

Image source: Getty Images.

America's best value stocks in one ETF

The Vanguard Morningstar Value ETF tracks the Morningstar U.S. Large Cap Value index, which holds 298 of America's biggest value stocks, ranked by market capitalization. It invests across 11 different sectors of the economy just like the S&P 500, but it's far more balanced.

For example, the technology sector has a weighting of just 10.6% in the Vanguard ETF, compared to a whopping 35.5% weighting in the S&P. The tech sector has plummeted by a whopping 17% over the past month alone, so it's the main source of the recent volatility in the S&P.

Moreover, the top 10 positions in the Vanguard ETF are a healthy mix of technology, financial, energy, consumer, and healthcare stocks.

Data source: Vanguard. Portfolio weightings are accurate as of Sept. 30, 2026, and are subject to change.

I know what you're thinking: Micron is not only a technology company, but it's also one of the world's top suppliers of high-bandwidth memory to the AI industry, so why is it the largest holding in a value-focused ETF? Simply put, its memory and storage chips are commoditized products, so its business is typically very cyclical. In fact, there is reason to believe its current growth phase might be running out of steam.

JPMorgan Chase is the world's largest investment bank. It operates in wealth management, corporate finance, consumer banking, and more. Its stock has returned just 4% this year, but it also offers shareholders a steady income stream thanks to its 1.95% dividend yield.

Berkshire Hathaway is the conglomerate that legendary investor Warren Buffett ran from 1965 to 2025. Its stock delivered a compound annual return of 19.7% during his 60-year tenure, and while he never liked paying dividends, he did return a substantial amount of money to shareholders through share buybacks. Berkshire is now run by Buffett's chosen successor, Greg Abel.

Outside of its top 10 holdings, investors will find a number of other well-known value stocks like Bank of America, Coca-Cola, and Home Depot, to name just a few.

Investing isn't always about maximizing returns

The Vanguard Morningstar Value ETF has delivered a compound annual return of 9.7% since it was established in 2004, underperforming the S&P 500, which gained an average of 10.8% per year over the same period. Its lesser exposure to the technology sector is the primary reason for its underperformance, but sometimes generating the best possible returns isn't the most important thing.

The Vanguard ETF beats the S&P 500 in two areas. First, it has a dividend yield of 1.7%, compared to just 1% for the S&P. Second, the ETF typically performs better during periods of severe volatility. When the recent AI sell-off sparked a 6% decline in the index, the Vanguard ETF was down by just 3%.

Moreover, during the last bear market which started in 2022 and ended in 2023, the S&P was down by as much as 25%, whereas the Vanguard ETF experienced a much smaller decline of 18%. High-growth tech stocks tend to decline more sharply than value stocks during turbulent periods, as investors cash in their gains and move their money to safer assets. Given the Vanguard ETF's low exposure to technology, it holds up much better in those situations.

Therefore, if the AI sell-off turns into a full-blown correction or even a bear market for the S&P 500, the Vanguard ETF might be a great place for investors to park their money.

Bank of America is an advertising partner of Motley Fool Money. JPMorgan Chase is an advertising partner of Motley Fool Money. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AbbVie, Berkshire Hathaway, Caterpillar, Chevron, Cisco Systems, Home Depot, JPMorgan Chase, Micron Technology, Vanguard Morningstar Value ETF, and Walmart. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.