Vanguard ETFs Recovery Amid Tariff Concerns and Market Rebound

Vanguard bond ETFs showed a rebound following Trump's inauguration, but concerns linger. Investors are advised to stay cautious about the inflationary pressures linked to potential tariffs.

Date: 27-01-2025

AI Rating: 5

ETFs Performance: The report discusses the recent performance of Vanguard bond ETFs, particularly the Vanguard Long-Term Bond ETF and the Vanguard Long-Term Corporate Bond ETF. These funds experienced significant declines, about 8%, prior to Trump's inauguration, likely due to rising inflation concerns impacting bond yields despite the Federal Reserve's rate cuts at the end of 2024.

Market Rebound: The rebound of these ETFs in the days following Trump's inauguration could deceive investors into thinking the bond market is recovering. However, the analysis suggests that the underlying concerns about tariffs introduced by Trump may lead to further inflation, which would adversely affect long-term bond prices.

Tariff Implications: Trump's intent to impose tariffs of up to 25% on imports from Canada and Mexico, and a potential 10% tariff on Chinese goods raises alarms among bond investors who fear inflation could resurge. This perception is critical as it indicates a possible downturn for bond ETFs if inflation expectations climb.

Investment Recommendations: The report advises caution regarding long-term bond funds, suggesting instead that investors consider the Vanguard Financials ETF (VFH) as a better investment option for potential gains driven by deregulation and tax cuts that could favor financial stocks like JPMorgan Chase and Bank of America.

Conclusion: Overall, the report reflects a cautious outlook for long-term bond ETFs, emphasizing the importance of monitoring inflation risks tied to government tariff policies which could indicate a shift in market dynamics.

Stocks: BLV VCLT VFH JPM BRK.B MA V BAC