This ETF Has More Than Doubled the S&P 500's Returns This Year, but Be Aware of This One Issue It Could Face in the Second Half of the Year.
Yahoo Finance ·
Historically, the S&P 500 index has outperformed the Russell 2000 . But through market close on July 22, the Vanguard Russell 2000 ETF ( VTWO -0.42% ) , which mirrors the latter index, has more than doubled the former's returns this year -- up 19.3% to the S&P 500's 8%. Investors have slowed their buying of megacap tech stocks because those stocks have become so expensive. Instead, they are venturing into small-cap stocks , where there has been more value to be found lately. Broadly speaking, recent macroeconomic changes may alter this trajectory over the remainder of the year. More specifically, despite VTWO's impressive performance so far, it's worth keeping an eye on interest rates, given how they tend to affect smaller companies. Interest rates are typically increased to help fight inflation . And although June 2026's overall inflation numbers (based on the CPI-U) came in lower than May's, quieting calls to increase interest rates, renewed conflict in the Middle East could drive energy prices right back up. This would increase the possibility of an interest-rate increase at some point this year.
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