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Vanguard Value ETF (VTV) is up 11% year to date, outpacing Vanguard Growth ETF (VUG) at 9.4%, by owning mature cash-generative businesses in financials, healthcare, and industrials with a rock-bottom 0.03% fee. SPDR S&P 500 ETF (SPY) returned 92% over five years while VTV returned 71% and VUG returned 103%, but VTV has closed the gap sharply in recent months as higher Treasury yields at 4.46% (10-year) and 4.99% (30-year) punish long-duration growth stocks.

 

Long-term interest rates near 5% are making value stocks competitive again because their current dividend cash flows now compete directly with Treasury returns, while the Magnificent 7’s earnings concentration is moderating and the market breadth is finally widening beyond tech megacaps.

 

 

Act now: the analyst who called NVIDIA in 2010 just named his top 10 AI stocks — and Vanguard Value ETF didn't make the cut. Grab the names FREE today.

Act now: the analyst who called NVIDIA in 2010 just named his top 10 AI stocks — and Vanguard Value ETF didn't make the cut. Grab the names FREE today.

The Vanguard Value ETF (NYSEARCA:VTV) is up 11% year to date, a lead that only looks small next to the 9.4% return on the Vanguard Growth ETF (NYSEARCA:VUG) over the same stretch. That is the actual shape of the so-called Great Rotation so far in 2026. Value is ahead of growth on the year, and VTV has quietly done the work that nobody talks about at dinner parties: owning boring blue-chips while the AI narrative kept stealing the microphone.

The setup for VTV is straightforward. It tracks the CRSP US Large Cap Value Index, which screens mega-cap and large-cap names on book-to-price, forward earnings, dividends, and sales. The return engine is two parts. Dividends come from mature cash-generative businesses (financials, healthcare, industrials, staples), plus multiple re-rating when the market decides it has paid too much for growth. The fee is 0.03% as of April 2026, which is essentially free.

Start with rates. The 10-year Treasury is at 4.46% now, with the 30-year at 4.99%. Long yields at nearly 5% change the math for any stock whose cash flows sit decades out. Discount a 2045 earnings stream at 5% instead of 2% and the present value collapses, which is why mega-cap growth gets vertigo when the long end runs. VTV's holdings throw off cash now, and that cash competes with Treasuries on something close to equal terms.

JP Morgan's 2026 outlook notes that "select value sectors should play a bigger role in 2026, though growth should continue to fare well" as AI matures. The bank's case for portfolio balance matches what the numbers actually show.

Over five years, VTV returned 71%. VUG returned 103%, dividends reinvested. The SPDR S&P 500 ETF (NYSEARCA:SPY) returned 92%. Stretch the window to ten years and the gap widens, with VTV at 222% versus VUG at 436%. An investor who held VTV instead of VUG since 2016 underperformed by roughly two-to-one. That is the cost of owning value through the AI cycle.

What flipped is recent. Year to date, VTV is beating both VUG and SPY. Even the one-year picture is tight, with VTV up 26% versus VUG up 29%. The gap that used to be canyons is now a sidewalk crack. If you believe rates stay elevated and the Magnificent 7 earnings concentration moderates, VTV's relative performance keeps closing.

The rotation is not a straight line. Growth has been clawing back recently. The annual scoreboard favors value, whereas the most recent quarter favors growth.

Capped upside in AI booms. VTV underweights the megacap tech names that have driven roughly two-thirds of S&P 500 gains since 2020. If the next AI leg up arrives, VTV will sit it out.

Rate sensitivity in reverse. If the Fed cuts faster than expected and long yields fall back toward 3.5%, the discount-rate argument for value weakens and growth re-asserts.

Sector concentration in financials. Value indexes lean heavily on banks and insurers, so VTV inherits credit-cycle risk that a tech-tilted portfolio does not have.

Dividend-tax drag in taxable accounts. VTV's holdings throw off more income than growth ETFs, which is great in an IRA and less great in a brokerage account where qualified dividends still get taxed annually.

Treat VTV as the counterweight in a portfolio that already leans growth. A portfolio already 40% in the Invesco QQQ Trust (NASDAQ:QQQ), individual NVIDIA (NASDAQ:NVDA) shares, and a growth-heavy 401(k) target-date fund is overexposed to one factor. Adding 10% to 20% in VTV pulls the factor exposure back toward neutral and adds a dividend yield well above what growth ETFs offer. As the offset position in a tech-heavy book, VTV does exactly what it advertises, at a fee that essentially rounds to zero.

The Great Rotation is not a prediction anymore; it is showing up in the year-to-date numbers. VTV is not going to be the most exciting line item in a brokerage statement, and it is never going to be the ETF that anyone brags about at a holiday party.

What it will do is provide ballast when the AI trade hits an air pocket, deliver a real cash yield instead of a promise of future earnings, and charge almost nothing for the privilege. Investors who spent the last five years watching VUG and QQQ run away from everything else may find that the next five years look very different.

The valuations are stretched at the top, the rate environment punishes long-duration cash flows, and the breadth of the market is finally widening beyond a handful of tech megacaps. None of that guarantees VTV beats VUG over the next decade, but it does mean the risk-reward setup is closer to balanced than it has been at any point since the pandemic. For an investor whose portfolio already does the offense, VTV is a credible piece of the defense.

 

Act now: the analyst who called NVIDIA in 2010 just named his top 10 AI stocks — and Vanguard Value ETF didn't make the cut. Grab the names FREE today.