Which Vanguard ETF Is Most Likely to Soar During Trump's First Year Back in Office?

As the inauguration of Donald Trump as the 47th U.S. president approaches, investors are speculating about which stocks and exchange-traded funds (ETFs) might perform the best in a second Trump administration. With Vanguard offering 86 ETFs, investors may find it challenging to identify the most promising fund for the coming year. However, by examining Trump's proposed policies and the performance of Vanguard ETFs, we can narrow down the list to a top contender.



Trump's proposed policies, such as deregulation and corporate tax cuts, could significantly impact the performance of Vanguard ETFs. One sector likely to benefit from these policies is financial services. The Vanguard Financials ETF (VFH) is an attractive option in this regard, as it owns 409 stocks with a median market cap of $144.5 billion. Its top three holdings are JPMorgan Chase, Berkshire Hathaway, and Mastercard. Deregulation could be a breath of fresh air for many financial services companies, helping them generate higher profits. Additionally, Trump's proposed corporate tax cuts should also increase the earnings of these companies, providing a catalyst for the Vanguard Financials ETF.

However, it's essential to consider the valuation of the Vanguard Financials ETF. With an average P/E ratio of 18.4, the fund is roughly 50% below the sky-high earnings multiple of the Vanguard S&P 500 Growth ETF (VOOG). This suggests that the Vanguard Financials ETF may be undervalued compared to the broader market.

Another factor to consider is the potential impact of Trump's proposed tariffs. If these tariffs are imposed, they could cause inflation to jump again, which could bring the Federal Reserve's rate cuts to a screeching halt. This scenario could hurt small-cap stocks and ETFs, which typically rise as interest rates decline. However, the Vanguard Small-Cap ETF (VB) and the Vanguard S&P Small-Cap 600 ETF (VIOO) could still be attractive options in this environment, as they focus on smaller U.S. companies with less exposure to global markets.

In conclusion, the Vanguard Financials ETF (VFH) is the most likely Vanguard ETF to soar during Trump's first year back in office, thanks to its exposure to the financial services sector and its attractive valuation. However, investors should also consider the potential impact of Trump's proposed tariffs on small-cap stocks and ETFs. As always, it's essential to conduct thorough research and consider multiple factors before making any investment decisions.