2 Vanguard ETFs to Buy to Outperform the S&P 500 Over the Next Decade, According to Analysts

Vanguard’s Capital Markets Model projects 10-year annualized returns of 6.9% for value stocks and 6.8% for small-cap stocks, versus 5.9% for the total U.S. equity market and 5.8% for large-cap stocks. The article argues valuations remain stretched in growth and large-cap segments, while value and small caps still look undervalued. It highlights Vanguard Value ETF (VTV) and Vanguard Small-Cap ETF (VB), both with 0.03% expense ratios, as low-cost ways to tilt portfolios toward those segments.

Analysis

The deeper signal is not just that value and small caps look cheap; it’s that the market is still pricing in a continuation of regime persistence that may not survive a normalization in rates, dispersion, and breadth. The highest beta of that mean reversion is likely in balance-sheet-sensitive small caps, where financing conditions and refinancing walls matter more than headline earnings growth. That creates a cleaner second-order opportunity in financials and cyclicals inside the value bucket than in generic “cheap” exposure, because these groups can re-rate both on multiple expansion and on lower funding stress.

The setup also implies a relative-vs-absolute debate: if the broad market grinds higher, underowned value and small cap can outperform without needing a correction in the index. But the reverse is equally important—if the mega-cap leadership narrows further, valuation spreads can stay stretched longer than a single year, especially if passive flows keep rewarding index heavyweights. In that scenario, the trade is less about calling a market top and more about harvesting a valuation carry trade with better asymmetry than owning the crowded growth complex outright.

The article’s mention of NFLX and NVDA is useful mostly as a sentiment read-through: these are still the default names investors use to express secular growth, so even a mild shift toward value suggests the market is beginning to question how much duration it wants to own at current multiples. NVDA remains the cleaner fundamental story, but the bar for disappointment is now much higher; NFLX has less cyclical support and is more vulnerable if rates stay sticky and consumer elasticity tightens. INTC is a different case—its relevance here is as a capital-intensive turnaround where the market may still be overpaying for optionality relative to execution risk.

Key Decisions for Investors

• Initiate a 3-6 month long VTV / short QQQ pair trade: target valuation compression, with upside if breadth rotates; stop if mega-cap leadership re-accelerates and relative performance breaks out to new highs.
• Add VB on a staged basis over the next 4-8 weeks, but hedge with a short IWM call spread if you want to cap downside from macro growth scares; the cleaner thesis is rate-sensitive mean reversion, not a straight risk-on bet.
• Rotate a portion of growth exposure out of NFLX into VTV-style financials/industrials: NFLX is vulnerable to multiple compression if real yields remain elevated, while value cyclicals have a more direct catalyst path from dispersion and reflation.
• Avoid initiating fresh long INTC on this thesis alone; if you want optionality, prefer a small, defined-risk call spread only after evidence of margin improvement, because the stock is more execution-sensitive than the index-level value trade.
• Use NVDA as a relative quality hold rather than an outright add here; if trimming growth, reduce lower-conviction exposures first and keep the highest-ROI AI winner, since the market can still justify premium multiples for scarce earnings power.