Markets have become more nervous in 2026. What began as a rotation out of technology towards more defensive and value-oriented areas of the market has become a more pronounced sell-off of any sectors that could be negatively affected by artificial intelligence (AI).
He S&P 500 and the Nasdaq-100 The indices haven’t seen any major pullbacks yet, but it’s easy to see that happening if investor fear takes over. If that happens, investors may want to look for areas of the market that could excel as U.S. stocks correct.
Where to invest $1,000 right now? Our team of analysts has just revealed what they believe are the 10 best stocks to buy right now, by joining Stock Advisor. See the actions »
Below are three of the best Vanguard exchange-traded funds (ETFs) that could do particularly well if stocks fall into a bear market or worse.
He Vanguard Extended Duration Treasury ETF (NYSEMKT:EDV) It would be a clear alternative to stocks in a bear market scenario, although it would not be considered a low-risk play.
Stocks and Treasuries typically have an inverse correlation, meaning bond prices rise when stocks fall. Long-term Treasury bonds, however, come with a lot of sensitivity to interest rates and that can make them volatile.
But if interest rates fall in a bear market, which often happens due to the demand for the safety of Treasuries and the fact that the Federal Reserve often cuts rates in such a scenario, the potential for stock price upside is significant.
He Vanguard Consumer Staples ETF (NYSEMKT:VDC) You invest in stocks, so you still have downside risk if the stock plummets. However, due to their defensive and long-lasting nature, they generally fall less than the S&P 500 in corrections.
In 2022, for example, the Vanguard S&P 500 ETF fell more than 18% for the full calendar year. But this ETF fell less than 2%. It was still a loss, but it would have provided investors with a significant amount of downside protection.
He Vanguard Total Bond Market ETF (NASDAQ:BND) it would be more of a risk hedge for your standard stock portfolio. It does not target any specific subsector of the bond market in an attempt to maximize profits. It simply gives you the entire investment-grade market, including corporates, Treasuries, and mortgage-backed securities (MBS).
As is the case with other bond funds, there is some interest rate sensitivity here, but it will be less than that of the Extended Duration Treasury ETF. But as a tool to offset downside risk and stock volatility in a bear market, this ETF is likely to offer protection, risk mitigation, and potentially some stock price gains in the process.