As the U.S. prepares for the inauguration of Donald Trump as the 47th President, investors are actively speculating about the potential winners in the stock market during his second term. Exchange-traded funds (ETFs) are gaining significant attention as a more diversified and lower-risk investment option compared to individual stocks. Among the top investment managers, Vanguard stands out for its diverse range of ETFs.
This article explores some of the Vanguard ETFs that could thrive in a Trump-led administration, focusing on potential market trends, economic policies, and industry growth factors that may influence their performance.
1. Vanguard S&P 500 Growth ETF (VOOG)
The Vanguard S&P 500 Growth ETF (NYSEMKT: VOOG) emerged as the best-performing Vanguard ETF in 2024, driven primarily by its exposure to the “Magnificent Seven” tech giants, including Apple, Microsoft, and Nvidia.
Key Strengths:
- Heavy allocation to tech and growth stocks.
- Benefited from AI advancements and tech sector expansion.
However, the VOOG ETF currently trades at an elevated price-to-earnings (P/E) ratio of 36.5, raising concerns about valuation risks. If Trump’s economic policies favor deregulation and corporate tax cuts, tech giants could continue to thrive, keeping VOOG in a strong position.
2. Vanguard Small-Cap ETF (VB)
The Vanguard Small-Cap ETF (NYSEMKT: VB) offers exposure to smaller U.S. companies, which could benefit significantly from Trump’s proposed policies favoring deregulation and pro-business tax reforms.
Key Catalysts:
- Historically, small-cap stocks tend to outperform large caps during economic expansions.
- Trump’s plans to reduce regulatory burdens could directly benefit small businesses.
Potential Risks:
- Small-cap stocks are sensitive to interest rates, and the Federal Reserve’s stance on rate hikes could limit their growth.
- Inflation concerns, driven by tariffs and immigration policies, might slow small-cap momentum.
Nonetheless, if Trump’s policies are pro-growth and encourage domestic manufacturing and development, VB could see significant gains.
3. Vanguard Energy ETF (VDE)
Energy could be a focal point under Trump’s presidency, with his campaign emphasizing a revival of domestic oil production. The Vanguard Energy ETF (NYSEMKT: VDE), which holds major oil companies like ExxonMobil, Chevron, and ConocoPhillips, could benefit from renewed emphasis on energy independence.
Key Drivers for Growth:
- Trump’s pro-drilling stance and promises to expand fossil fuel production.
- Potential rollback of environmental regulations could favor oil companies.
However, global energy markets remain volatile, and geopolitical tensions could influence pricing dynamics. If oil prices rise due to supply restrictions, the VDE ETF could perform exceptionally well.
4. Vanguard Value ETF (VTV)
The Vanguard Value ETF (NYSEMKT: VTV) focuses on established blue-chip companies with strong fundamentals. Historically, value stocks tend to perform well in stable or pro-business environments, especially when corporate tax reductions and reduced regulations are in play.
Why It Could Win:
- Focus on financially stable companies with reliable dividends.
- Value stocks often perform well in a lower-growth, stable regulatory environment.
Trump’s economic focus on deregulation, infrastructure spending, and lower corporate taxes could create favorable conditions for value stocks, making VTV a strong candidate for long-term growth.
5. Vanguard Financials ETF (VFH)
The Vanguard Financials ETF (NYSEMKT: VFH) holds a diversified portfolio of major banks and financial institutions such as JPMorgan Chase, Bank of America, and Wells Fargo. If Trump’s policies favor deregulation of the banking industry, financial stocks could experience significant growth.
Potential Catalysts:
- Repeal or modification of financial regulations, such as the Dodd-Frank Act.
- Lower corporate taxes improving bank profitability.
However, financial stocks are interest-rate sensitive. If inflation rises and the Fed keeps rates elevated, banks could face margin pressures despite deregulation benefits.
Policy Factors Likely to Impact Vanguard ETFs in a Trump Administration
1. Deregulation and Tax Cuts:
Trump’s pro-business stance includes promises of reduced corporate taxes and regulatory rollbacks, which could boost small-cap and energy-focused ETFs.
2. Tariffs and Trade Policies:
Trump’s emphasis on tariffs, particularly against China, could disrupt global supply chains. While this may benefit domestic-focused ETFs like VB, it could strain globally diversified funds.
3. Energy Independence:
An aggressive push for fossil fuel production could directly benefit VDE but might create volatility in international energy markets.
4. Inflation and Interest Rates:
Tariffs, combined with expansive fiscal policies, could drive inflation higher, potentially limiting growth in small-cap ETFs while favoring value and financial ETFs.
Final Analysis: Top Vanguard ETF for 2025
Considering Trump’s proposed policies and historical performance, the Vanguard Small-Cap ETF (VB) and the Vanguard Energy ETF (VDE) appear well-positioned for growth in 2025. However, the Vanguard S&P 500 Growth ETF (VOOG) remains a strong contender due to its heavy tech exposure, especially if pro-business policies support innovation and corporate expansion.
Investors should closely monitor policy developments, Federal Reserve actions, and global economic trends before making investment decisions.
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