President Donald Trump has been in office for just two months, but the market is already shaking with his saber rat over tariffs.
S&P 500 (^gspc 0.08%)) Last week we sunk into a correction defined as a drop of more than 10% from our recent peak. This is because investors respond to weakening consumer sentiment and other signs of macroeconomic headwinds by selling stocks. And only, the uncertainty about recurring tariffs has placed emphasis on business and investor trust.
While concerns about the recession may be premature, President Trump and other executive leaders have acknowledged that short-term pain may be needed to reset the economy, in response to their vision to strengthen US manufacturing bases and erasing the trade deficit with the country’s top trading partners. Most economists believe that tariffs will negatively affect economic growth and raise prices, and many business leaders from a wide range of industries believe these statements are reflected.
Not surprisingly, some investors are trying to invest outside the US as a hedge against instability and risks regarding tariffs and weakening of economic indicators.
It’s not so easy to diversify your portfolio with international stocks, especially with limited coverage outside the US. But one seamless way to do that is to invest in an Exchange Transaction Fund (ETF) that holds international stocks. In particular, one Vanguard ETF is perfect for the current market environment.
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Grab your passport
One of the top performance ETFs of the year is the Vanguard FTSE Development Market ETF (vea) -0.59%))ETFs investing in large stocks outside the US until the end of Friday, up 10.8% in 2025, easily surpassing the S&P 500 and falling 3.5%.
During the first few weeks of this year, the two investments were essentially traded in tandem, but as the chart below shows, they began to diverge shortly after Trump took office.
VEA data by YCHARTS.
Vanguard FTSE’s development market ETF owns many top companies from Europe and other regions of the world, including SAP, Novo Nordisk, ASML, and Nestlé. Top Holdings from outside Europe include HSBC Holdings and Toyota Motor.
Approximately 55% of its holdings come from Europe, while 34.5% come from the Asia-Pacific region.
The fund holds approximately 4,000 shares, with a median market capitalization of $45.9 billion. However, the top 10 holdings, including the names above, account for around 10% of the total portfolio. Vanguard ETF is designed to track FTSE-developed All-CAP Ex-US indexes.
The Vanguard FTSE Development Market ETF has another advantage over the S&P 500, in addition to providing investors with the advantage of exposure to stocks that are not directly at the fire boundary from US tariffs.
The ETF is currently trading at a price of 15.9 and a rate of return compared to the 25 S&P 500.
That premium is the result of the S&P 500’s previous outperformance in the bull market that began in 2023, driven by the launch of ChatGPT and the surge in “epic seven” stocks following the start of the AI boom.
The reversal in that trend appears to indicate that investors are turning from the US to take advantage of the better value represented by the Vanguard FTSE Development Market ETF.
Do you buy this Vanguard ETF?
Given the valuation gap between the internationally focused ETF and the S&P 500, the Vanguard FTSE ETF looks like a good bet on outperform, especially when uncertainty continues regarding tariffs and weakening of economic sentiment.
If you are looking to diversify from US stocks during these uncertain times, this developed market ETF is an easy way to get in touch with large, profitable companies in Europe and around the world.
HSBC Holdings is the advertising partner of Motley Fool Money. Jeremy Bowman holds an ASML role. Motley Fool has a job at ASML and Vanguard tax management funds and recommends the Vanguard FTSE Development Market ETF. Motley Fool recommends HSBC Holdings, Nestlé and Novo Nordisk. Motley Fools have a disclosure policy.
