The Vanguard S&P 500 Growth ETF surged by 35.8% in 2024, outpacing the 25% gain in the S&P 500. This continued a long-term trend of the ETF averaging a higher return than the S&P 500 since its 2010 launch. Currently, the stock market is experiencing a brutal sell-off triggered by sweeping tariffs announced by President Donald Trump.
The ETF is down 17% year to date, while the S&P 500 has declined by 14%. However, there are reasons to believe the ETF will rebound and outperform the index in 2025. The top five holdings in the ETF—Nvidia, Apple, Microsoft, Meta Platforms, and Amazon—account for about 34% of its total value.
These stocks are down an average of 21% in 2025, contributing to the ETF’s steep decline. President Trump announced “reciprocal” tariffs on goods imported from countries with significant trade surpluses with the U.S. Semiconductors are exempt, protecting Nvidia’s AI data center chips. Digital products like software and subscription services are not currently subject to tariffs, benefiting Microsoft and Meta Platforms.
Vanguard ETF recovery prospects beneficial
Amazon’s e-commerce segment may be affected as it imports products globally. Apple is one of the hardest-hit companies due to its manufacturing in China.
Analysts suggest the latest iPhone could see its price soar to $2,300 from $1,599, potentially hurting demand and revenue. The ETF has delivered a 15.3% compound annual return since 2010, outperforming the S&P 500’s 13.8% average annual gain over the same period. This outperformance persisted despite several economic shocks.
Investors gravitate towards the ETF’s top holdings for their high growth, reliable earnings, and ability to endure economic storms. These companies are also leaders in the AI industry, which could add $15.7 trillion to the global economy by 2030. The ETF can recover if countries negotiate to reduce reciprocal tariffs or if investors recognize that a significant portion of the ETF’s portfolio isn’t directly affected by tariffs.
The ETF’s historical performance and the robust quality of its top holdings suggest it is well-positioned to outperform the S&P 500 in 2025. Investors should watch how the economic situation unfolds and assess their strategies accordingly.