Vanguard Index Fund Outpaces S&P 500 in Early 2026 Performance

The Vanguard Index Fund has recently outperformed the S&P 500, showing significant growth during the early months of 2026. The Vanguard Russell 2000 ETF, which tracks small-cap stocks, reported an impressive 8% return, in stark contrast to the S&P 500’s modest gain of just 1.4% so far this year.

Performance Comparison

The S&P 500, one of the most followed stock market indices, includes 500 of the largest publicly listed companies in the U.S. It is known for its diverse portfolio of major corporations, especially in the technology sector. In comparison, the Russell 2000 comprises approximately 2,000 smaller companies and has recently benefitted from favorable economic conditions.

Key Statistics

• Vanguard Russell 2000 ETF Return (2026): 8%
• S&P 500 Return (2026): 1.4%
• Healthcare Sector Weighting (Russell 2000): 18.8%
• Industrials Sector Weighting (Russell 2000): 18.1%
• Financial Sector Weighting (Russell 2000): 17.2%

Small-cap companies within the Russell 2000 are more diversified across various sectors than the S&P 500, which is heavily weighted toward technology. The top 10 holdings in the Vanguard Russell 2000 ETF represent only 5% of its total value, thus balancing the risk across a broader array of stocks.

Sector Performance and Economic Benefits

Several companies within the Russell 2000 have shown remarkable performance metrics. For instance, Credo Technology’s stock has surged by nearly 900% since early 2023. Such growth is fueled by its innovative data center solutions that are increasingly crucial for AI applications.

• Top Holdings in the Russell 2000 ETF:
  • Credo Technology Group – 0.74%
  • Bloom Energy – 0.64%
  • Fabrinet – 0.55%
  • IonQ – 0.51%
  • EchoStar – 0.50%
  • Nextpower – 0.43%
  • Kratos Defense – 0.43%
  • Guardant Health – 0.42%
  • Hecla Mining – 0.41%
  • BridgeBio Pharma – 0.41%

Future Outlook for the Vanguard ETF

Looking ahead, the potential for continued strength is bolstered by economic policies that support domestic industries. The U.S. Federal Reserve’s recent interest rate cuts have had a particularly favorable impact on small-cap companies. Approximately 32% of the Russell 2000 firms have floating-rate debt, enabling them to benefit directly from lower borrowing costs.

Goldman Sachs notes that the Russell 2000 is currently attractively priced, trading at a price-to-earnings (P/E) ratio of 20.4—significantly lower than the S&P 500’s 25.2. This valuation disparity, coupled with a robust economic environment, bodes well for the Vanguard Russell 2000 ETF’s performance throughout the remainder of 2026.

In summary, as the Vanguard Index Fund continues to outperform the S&P 500, investors may find opportunities in the dynamic market environment shaped by small-cap stocks.