Heading into the second half of 2026, investors face both optimism and uncertainty. There is some optimism about the upcoming second-quarter earnings following a market bounce-back quarter after a rocky first quarter.
Further, while economic conditions remain tenuous due to inflation, geopolitical conflicts, and a sputtering labor market, most economists expect at least 2% GDP growth in 2026.
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On the other hand, historically high stock market valuations create uncertainty for some investors. Even with strong earnings, investors may be hesitant to pile into overvalued large-cap and AI stocks.
The best way to deal with uncertainity is through diversification. A portfolio too heavy with large-cap growth names, through S&P 500, Nasdaq, and popular technology exchange-traded funds (ETFs), results in too much of your portfolio focused on the same stocks. So if there is a correction or a crash, your whole portfolio will move in the same direction.
To balance things out, this might be the best ETF to buy right now.
iShares Russell 1000 Value ETF
While the S&P 500 had a strong second quarter and is up about 8% year to date (YTD), small and mid-cap value stocks have outperformed large-cap growth stocks. This has occurred as investors have rotated out of large-cap stocks to diversify their portfolios with smaller-cap stocks and value names.
The numbers bear this out as the S&P 500 is up 8% YTD and roughly 20% over the past 12 months. But the Russell 1000 Value index is up 15% YTD and 25% over the past year. In contrast, the Russell 1000 Growth index is only up 1% YTD and 13% over the past year.
The outperformance is more pronounced for small caps. The Russell 2000 Value index has returned 22% YTD and 41% over the past 12 months.
Today’s Change
Current Price
So, with the cyclically adjusted P/E (CAPE) ratio hovering near its highest levels since the dot-com boom in 2000, investors should consider adding a good value stock ETF to their portfolio — like the iShares Russell 1000 Value ETF (IWD +0.60%).
The iShares Russell 1000 Value ETF invests in undervalued large- and mid-cap stocks, so there will be limited overlap with broad S&P 500 ETFs, and even less overlap with technology and growth ETFs.
However, you will still get access to undervalued tech stocks, like the top three current holdings — Amazon, Apple, and Microsoft.
The iShares ETF is up about 15% YTD and 26% over the past 12 months, beating the S&P 500. Longer term, it trails the S&P 500, with 9% annualized returns over both the 5- and 10-year periods. But many investment strategists, including Vanguard, believe that value stocks will outperform large-cap U.S. stocks over the next decade. This is mainly due to AI broadening beyond tech, large-cap valuations, and investors rotating into less risky assets.
So, IWD is an excellent option right now for both short-term diversification and solid long-term growth.
