President Donald Trump has been in office for only two months, but already his saber-rattling over tariffs has roiled markets.
The S&P 500 (SNPINDEX: ^GSPC) last week sank into a correction, defined as a drop of 10% or more from a recent peak, as investors have responded to weakening consumer sentiment and other signs of macroeconomic headwinds by selling stocks. And the uncertainty around the on-again, off-again tariffs has weighed on business and investor confidence.
While concerns about a recession might be premature, President Trump and other administration leaders have acknowledged that short-term pain might be necessary to reset the economy according to his vision of strengthening the U.S. manufacturing base and erasing trade deficits with the country’s top trading partners. Most economists believe that tariffs will have a negative impact on economic growth and raise prices, and a number of business leaders from a wide range of industries have echoed those statements.
Not surprisingly, some investors are looking to invest outside of the U.S. as a hedge against the volatility and risk around tariffs and weakening economic indicators.
Diversifying your portfolio with international stocks isn’t so easy, especially since companies outside of the U.S. often receive limited coverage. But one seamless way to do it is by investing in an exchange-traded fund (ETF) that holds international stocks. One Vanguard ETF in particular could be just right for the current market environment.
One of the top-performing ETFs this year has been the Vanguard FTSE Developed Markets ETF (NYSEMKT: VEA), which invests in large-cap stocks outside the U.S. Through Friday’s close, the ETF is up 10.8% in 2025, easily outperforming the S&P 500, which is down 3.5%.
For the first few weeks of the year, the two investments essentially traded in tandem, but they began to bifurcate shortly after Trump took office, as the chart below shows.
The Vanguard FTSE Developed Markets ETF holds a number of top companies from Europe and other parts of the world, including SAP, Novo Nordisk, ASML, and Nestlé. Top holdings from outside of Europe include HSBC Holdings and Toyota Motor.
About 55% of its holdings come from Europe, while 34.5% come from the Asia-Pacific region.
The fund holds nearly 4,000 stocks, with a median market cap of $45.9 billion. But the top 10 holdings, which include the names above, make up roughly 10% of the total portfolio. The Vanguard ETF is designed to track the FTSE Developed All-Cap ex-US Index.
