Vanguard ETF news: vanguard small-cap value etf is near its all-time high

Some of these skyrocketing ETFs aren't surprises, vanguard small-cap value etf is one Vanguard ETF that is near its all-time high, and it could soar even more.

A Surprising Highflier

For years, small-cap stocks have lagged behind their large-cap counterparts. Value investors have also faced challenges, as their preferred stocks have trailed behind more exciting growth options. This trend hasn't been favorable for the Vanguard Small-Cap Value ETF (NYSEMKT: VBR), which focuses on small-cap value stocks. As of July 1, the ETF had only risen 0.33% year-to-date, while the Vanguard S&P 500 Growth ETF soared by 24%.

However, the situation has changed dramatically. In recent months, the Vanguard Small-Cap Value ETF has surged and reached a record high in late November, maintaining that momentum.

Most of the 836 stocks in this ETF aren’t as glamorous as Nvidia or Walmart. Its top holdings include companies like Smurfit WestRock and EMCOR Group, which often fly under the radar. Yet, many of these stocks are gaining traction.

Why This Vanguard ETF Could Rise Further

This momentum will propel the Vanguard Small-Cap Value ETF even higher. Several favorable factors are either already in play or on the horizon.

The most significant is the Federal Reserve's decision to cut interest rates twice in the past three months. Small-cap stocks are particularly sensitive to interest rates, as smaller companies tend to rely more on borrowing. Lower rates lead to decreased borrowing costs and increased profitability.

Additionally, prospects for deregulation under a potential second Trump administration could benefit smaller companies. President-elect Trump has pledged to eliminate ten existing regulations for every new one introduced. If he follows through, it could significantly ease regulatory burdens for smaller firms. His proposed steep tariffs on imports could also favor many small-cap companies competing against foreign rivals.

Another factor likely to benefit the Vanguard Small-Cap Value ETF is the historical tendency for the valuation gap between small-cap and large-cap stocks to revert to the mean. In August 2024, this gap was the widest since 1998 and 1999. Historically, small-cap stocks have outperformed large-cap stocks in the subsequent years.

History Is on Its Side

Small-cap stocks have historically outperformed large-cap stocks by about 10% in the first year following an initial interest rate cut by the Federal Reserve. Since 1936, small-cap stocks have consistently outperformed large-cap stocks, while value stocks have outperformed growth stocks.

The Vanguard Small-Cap Value ETF as a strong choice for investors in the upcoming year and an even better long-term investment. Its historical performance supports this outlook.

The Vanguard Small-Cap Value ETF owns 836 stocks. That's a larger portfolio than the Vanguard S&P Small-Cap 600 Value ETF, which owns 460 stocks.

While all Vanguard ETFs are usually cost-effective compared to rival funds, some are cheaper than others. The annual expense ratio of the Vanguard Small-Cap Value ETF is 0.07%, lower than the expense ratio of 0.11% for the Vanguard S&P Small-Cap 600 Value ETF.

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Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.