Key Points

Vanguard analysis indicates value equities and fixed income may deliver solid results over the coming years.
The Vanguard U.S. Value Factor ETF has beaten the S&P 500 over the past year and trades at an attractive earnings multiple.
After challenging periods for fixed income, the Vanguard Total Bond Market ETF has posted a gain near 4 percent over the past year.

Fresh research from Vanguard offers an upbeat view of the U.S. economy. The June market outlook forecasts 3 percent GDP expansion by 2027, which should support equities, and core inflation easing to 2.7 percent, a development that could lift bond prices.

The report highlights U.S. value stocks as potentially attractive holdings. These firms stand to gain from AI-driven efficiency improvements while avoiding the heavy initial spending on data centers and other infrastructure.

If Vanguard forecasts for 2027 hold appeal, investors may wonder how to position portfolios now. Although the research stops short of naming specific holdings, two widely held Vanguard ETFs - the Vanguard U.S. Value Factor ETF and the Vanguard Total Bond Market ETF - offer straightforward ways to gain exposure to value stocks and bonds.

Here is a closer look at each fund and whether either might suit a diversified portfolio.

Vanguard U.S. Value Factor ETF: Broad exposure across 649 holdings and eight-year annualized returns of 10.6 percent

This actively managed ETF targets U.S. companies trading at lower valuations relative to their fundamentals. Its 649 holdings span large-, mid-, and small-cap value names. The fund rose 12.9 percent in the first half of the year and 28.1 percent over the trailing twelve months, outpacing the S&P 500.

Sector allocations are balanced. Investors seeking relief from heavy technology concentration in broad market indexes will find meaningful weight in other areas. Top sectors include financials at 23.5 percent, consumer discretionary at 18.5 percent, healthcare at 14.7 percent, technology at 12.6 percent, and industrials at 10.7 percent.

The portfolio remains diversified at the individual holding level. Largest positions include CVS Health at 0.97 percent, EOG Resources at 0.87 percent, Cigna Group at 0.83 percent, Bristol Myers Squibb at 0.81 percent, and Verizon Communications at 0.80 percent.

The expense ratio stands at 0.13 percent, reasonable for active management, while the trailing twelve-month yield is 1.93 percent.

Value strategies have trailed growth over longer stretches. Since inception in February 2018 the fund has returned 10.6 percent annualized, lagging the S&P 500. Yet its current price-to-earnings ratio near 11 represents a sizable discount to the broader index multiple around 25, suggesting room for catch-up if forecasts prove accurate.

Vanguard Total Bond Market ETF: More than 11,000 holdings and 3.1 percent annualized returns since 2007

Bond investors have faced headwinds recently. The fund posted just 0.1 percent annualized over the past five years. Longer-term results look stronger, however. From launch in April 2007 through June 30 the ETF delivered 3.1 percent annualized, with a 3.7 percent return over the past year.

Costs are minimal at 0.03 percent. The portfolio holds 11,455 bonds blending U.S. government and corporate debt. Should inflation and interest rates moderate as Vanguard projects, today's bond purchases could benefit from price appreciation and steady income.

Future sector and asset-class leadership remains uncertain. Still, investors who expect AI productivity gains to broaden across the economy and anticipate lower rates may find the value-stock and broad-bond ETFs useful building blocks for a long-term, diversified allocation.