The big rotation away from tech and growth stocks in 2026 has created several opportunities elsewhere in the stock market. Value, dividends, small-cap, international, and defensive stocks have all outpaced the S&P 500 by fairly wide margins this year.
How well tech and growth have done over the past several years means that these areas could be in line for an extended stretch of outperformance and catching up.
To me, three ETFs present compelling cases for why their strong performance in the first quarter of this year could carry forward to the rest of 2026 and beyond:
- Schwab U.S. Dividend Equity ETF (SCHD 1.23%)
- State Street SPDR S&P Oil & Gas Exploration & Production ETF (XOP +0.42%)
- iShares MSCI South Korea ETF (EWY 0.40%)
Image source: Getty Images.
Key takeaways
- With the market finally rotating away from tech and growth stocks, a number of other areas of the market are emerging as real opportunities.
- Previously unloved areas, such as dividends, energy, and international stocks, have exhibited strong performance in 2026.
- This rotation is partially a reflection of deteriorating economic conditions and geopolitical unrest.
- These three ETFs all offer low-cost access to themes and areas of the market with long-term structural tailwinds.
1. SCHD: The comeback for dividend stocks
The Schwab U.S. Dividend Equity ETF had a really rough stretch from 2023 to 2025. Its strategy, which had produced above-average returns for roughly a decade, fell deeply out of favor to the point where it was one of the worst-performing dividend ETFs in the entire market.
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2026 has seen a complete turnaround. Last year’s annual portfolio reconstitution resulted in about 40% of the fund being positioned in energy and consumer staples stocks. It wasn’t popular at the time, but it juiced performance immensely this year.
Given its heavy tilt toward value and defensive stocks, even keeping up with the S&P 500 has been a major victory. Now it’s positioned to actually outperform the index for an extended period if current economic concerns result in a prolonged risk-off environment.
2. XOP: Energy’s structural story goes beyond oil prices
The State Street SPDR S&P Oil & Gas Exploration & Production ETF is more than just a play on energy prices. It has a structural tailwind behind it.
From a fundamental perspective, E&P companies were cheap even before the Iran War drove crude oil prices above $110 (the portfolio trades at a forward price-to-earnings (P/E) ratio of just 11). But higher energy prices could continue unlocking even more value from this group.
NYSEMKT: XOP
SPDR Series Trust – State Street SPDR S&P Oil & Gas Exploration & Production ETF
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From a macro perspective, the U.S. energy independence story is sturdy. Even if oil prices retreat and geopolitical risks subside, the long-term capex cycle to continue building infrastructure will stay in place. This fund’s equal-weight approach helps people invest in the theme itself, not just a handful of mega-cap names.
3. EWY: South Korea is the emerging AI trade
Since the beginning of 2025, the iShares MSCI South Korea ETF is up roughly 180%. That would suggest that most of the short-term upside potential has already been had. But I’m not sure that’s the case.
South Korea’s presence in the semiconductor supply chain has made it an under-the-radar opportunity in the AI trade. Samsung (SSNLF +55.02%) and SK Hynix are the fund’s two biggest holdings with a combined allocation of 43%, so there’s high concentration risk in this ETF. But these two companies are also the biggest players in this space. As long as they’re successful, the fund should be successful.
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South Korea still trades at just 17 times earnings. That means it’s not necessarily expensive despite the recent rally. If investors are still interested in the AI trade but don’t like the value in the Magnificent Seven companies, this ETF could be an attractive alternative.
ETF comparison at a glance
| Metric | SCHD | XOP | EWY |
|---|---|---|---|
| 2026 YTD return | +12.4% | +43.4% | +30.8% |
| Expense ratio | 0.06% | 0.35% | 0.59% |
| Dividend yield | 3.4% | 1.6% | 0.3% |
| Primary strategy | Dividends & value | Energy exploration & production | South Korea |
| Risk profile | Lower to moderate | Moderate to higher | Moderate to higher |
| Best use case | Core equity income | Energy demand and geopolitical risk | AI supply chain |
Data source: Fund documents; returns as of 4/7/26.
Three different ETFs. Three very different opportunities in this market.
Value has been out of favor for so long that a longer-term return to outperformance seems more likely than not. If the fundamental and structural narratives for these funds remain intact, the ride higher might not be done.
