Wall Street's consensus projects a 27 percent advance for the S&P 500 next year. But two sectors are expected to meaningfully outpace that: information technology at 44 percent and communication services at 35 percent, according to FactSet Research.
The Vanguard Information Technology ETF (VGT) offers direct exposure to this disparity. The fund tracks 318 stocks across software, cloud services, hardware, equipment, and semiconductors. Over two decades, VGT returned 1,900 percent (15.1 percent annually) versus the S&P 500's 677 percent (10.8 percent annually)—roughly double the benchmark's gain. That outperformance reflects the structural tailwinds of cloud adoption and AI infrastructure buildout.
But VGT carries real concentration risk. More than 50 percent of assets sit in just five stocks. A downturn in semiconductor cyclicality or a pullback in hyperscaler AI spending would hit the fund disproportionately hard. The fund's 0.09 percent expense ratio is negligible; the risk is portfolio construction, not fees. For investors underexposed to tech, VGT works as a satellite position—not a core holding.
The Vanguard Communication Services ETF (VOX) tells a different story. The 111-stock fund tracks telecom, interactive media, and entertainment. Over two decades, VOX returned 290 percent (7.1 percent annually), materially trailing the S&P 500. That structural underperformance reflects secular headwinds in traditional media and telecom.
Wall Street projects 19 percent earnings growth for communication services next year, a sharp acceleration. But historical returns suggest this sector faces persistent competitive and technological pressures that offset near-term earnings optimism. VOX is the harder call: earnings growth alone does not guarantee multiple expansion when structural trends remain unfavorable.
