Wall Street's median target price says the S&P 500 (^GSPC 0.57%) will increase to 8,698 over the next year. That implies 14% upside from its current level of 7,615. Meanwhile, analysts estimate the healthcare and communication services sectors will return 21% over the same period.

Investors who want direct exposure to those sectors should consider buying shares of the Vanguard Health Care ETF (VHT 0.14%) and Vanguard Communications Services ETF (VOX +0.22%). Here are the important details.

Image source: Getty Images.

1. Vanguard Health Care ETF

The Vanguard Health Care ETF tracks 405 U.S. companies in the healthcare sector that generally fall into two categories: (1) companies that make healthcare equipment or provide healthcare services, and (2) companies involved in pharmaceutical and biotechnology research. The five largest holdings are as follows:

1. Eli Lilly: 12.1%.
2. Johnson & Johnson: 8.8%.
3. AbbVie: 6%.
4. UnitedHealth Group: 5.4%.
5. Merck: 4.3%.

The Vanguard Health Care ETF has a low expense ratio of 0.09%. However, the index fund returned 148% (9.5% annually) over the past decade. Meanwhile, the broader S&P 500 returned 329% (15.6% annually).

Looking ahead, Wall Street estimates healthcare sector earnings will increase 3% in 2026, the slowest growth of any stock market sector. Analysts expect earnings growth to accelerate to 19% in 2027, but the current valuation of 27 times earnings still looks expensive.

The pharmaceutical industry, which accounts for one-third of the Vanguard Health Care ETF, is dealing with a major problem. In the next four years, nearly 200 drugs, including 69 that generate at least $1 billion in annual sales, will lose patents. That so-called "patent cliff" paints a bleak financial picture for the years ahead.

Here's the bottom line: Wall Street says the healthcare sector will outperform the broader S&P 500 over the next year. But I am skeptical because of historical underperformance, high valuations, and headwinds in the pharmaceutical industry. For those reasons, I'd rather own an S&P 500 index fund.

2. Vanguard Communication Services ETF

The Vanguard Communication Services ETF tracks 114 stocks in the communications services sector. The index fund is most heavily weighted toward three industries: telecommunications, interactive media, and entertainment. The five largest holdings are as follows:

1. Alphabet: 26.9%.
2. Meta Platforms: 20.3%.
3. Netflix: 5.1%.
4. Verizon Communications: 4.1%.
5. Walt Disney: 4%.

The Vanguard Communication Services ETF has a low expense ratio of 0.09%. But the index fund returned 152% (9.6% annually) over the past decade. Meanwhile, the broader S&P 500 returned 329% (15.6% annually).

Looking ahead, Wall Street estimates that communication services sector earnings will grow 28% in 2026. That makes the current valuation of 20 times earnings look attractive. More importantly, the sector could maintain strong earnings growth for years to come as companies such as Alphabet and Meta Platforms benefit from advancements in artificial intelligence.

Here's the bottom line: Wall Street expects the communication services sector to beat the S&P 500 over the next year. That is certainly plausible. Investors who agree should consider purchasing shares of the Vanguard Communication Services ETF. But I would still keep a larger portion of my portfolio in an S&P 500 index fund.

Why? The S&P 500 crushed the communication services sector during the past decade, and the same thing could happen in the years ahead because technology stocks, which make up about 40% of the S&P 500, will probably be the biggest winners as the artificial intelligence revolution unfolds.