The 10 Best Vanguard ETFs Mark a Shift in Sentiment

Vanguard’s utilities and energy sector funds are top performers in 2024.

kent
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Research Lead
Reviewed by: etf.com Staff
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Edited by: Ron Day

Vanguard’s top-performing exchange-traded funds of 2023, such as the Vanguard Information Technology ETF (VGT) and the Vanguard Mega Cap Growth ETF (MGK), have given up leadership in 2024 amid shifting market conditions.  

In the past three months, there’s been a marked shift in performance from the high-flying growth, tech-oriented funds to the more boring sector funds like Vanguard Utilities ETF (VPU) and Vanguard Energy ETF (VDE).  

This change in leadership reflects sentiment shifts as investors appear to be growing concerned about high valuations amid the prospect of a slowing economy. 

Read on to learn more about the best Vanguard ETFs in 2024, as measured by three-month returns through May 9, and why they’re leading performance this year. 

Why Vanguard ETFs Are So Popular

The Vanguard Group, Inc. has amassed over $8 trillion in global assets under management and is second only to BlackRock’s $10 trillion in assets. Vanguard ETFs rank among the most popular investments is for good reason—they offer a wide range of ETFs and mutual funds with some of the lowest expense ratios on the market.  

With more than 80 ETFs to choose from, investors can find almost any type of equity or fixed income strategy needed to build a diversified portfolio with exchange-traded funds. 

Five of the 10 largest ETFs in the world are Vanguard funds, which are led by the Vanguard S&P 500 ETF (VOO) with $444 billion in assets and the Vanguard Total Stock Market ETF (VTI) with $387 billion in AUM. 

Best Vanguard ETFs of 2024: The Top Performers

TickerFundExpense RatioAUM3-Mo Return
VPUVanguard Utilities ETF0.10%$5.6B19.64%
VDEVanguard Energy ETF0.10%$8.8B14.48%
VAWVanguard Materials ETF0.10%$3.0B10.35%
IVOGVanguard S&P Mid-Cap 400 Growth ETF0.15%$1.0B9.19%
VYMIVanguard Int'l High Dividend Yield Index ETF0.22%$7.5B8.31%
VGKVanguard FTSE Europe ETF0.09%$17.9B8.07%
VISVanguard Industrials ETF0.10%$5.4B7.71%
VOEVanguard Mid-Cap Value ETF0.07%$16.4B7.33%
VFHVanguard Financials ETF0.10%$9.3B7.32%
IVOOVanguard S&P Mid-Cap 400 ETF0.10%$2.0B7.14%

Data as of May 9, 2024. 

Vanguard’s Utilities, Energy, Materials ETFs Lead

As we outlined in our recent article on why defensive sectors are outperforming, several factors are potentially contributing to the strong performance of utilities, energy, and materials sectors in the stock market so far in 2024: 

Utilities

  • Defensive play: Utilities are often seen as defensive stocks, meaning they tend to hold their value or even outperform during economic downturns. In a period of potential economic uncertainty or recession fears, investors might flock to utilities seeking stability and reliable dividends. 
  • Interest rates: Utilities are less susceptible to rising interest rates compared to growth stocks. Since utilities typically have lower debt levels and consistent cash flows, their valuations are less impacted by interest rate hikes. Since many utility stocks pay competitive dividends, investors may be attracted to them as alternatives to bonds when interest rates begin to fall. 
  • Infrastructure spending: If there's a focus on infrastructure investment by the government, utility companies may benefit from increased demand for their services and potential expansion projects. 

Energy

  • Rising energy prices: The global energy market has seen significant price increases for oil, natural gas, and coal in 2024. This directly translates to higher profits for energy companies.
  • Geopolitical tensions: The ongoing situation in Ukraine and other geopolitical tensions have disrupted energy supplies and caused market volatility, leading to higher energy prices. 
  • Limited supply: Concerns about limited global oil and gas production capacity, coupled with rising demand, might push energy prices higher to the benefit of energy companies. 

Materials

  • Inflation hedge: Basic materials like steel, lumber, and chemicals typically act as a hedge against inflation. As inflation rises, the prices of these materials tend to go up as well, potentially protecting investors' purchasing power. 
  • Infrastructure projects: Similar to utilities, materials companies may benefit from increased government spending on infrastructure projects, driving demand for their products. 
  • Geopolitical tensions: Supply chain disruptions caused by geopolitical tensions can lead to higher prices for materials, benefiting companies in this sector.

Investors should note that these are just some of the possible explanations, and the specific reasons for each sector's performance can be complex. For example, investors might be rotating out of growth stocks that thrived in previous years and seeking value or defensive plays in sectors like utilities, energy, and materials. 

Positive news or developments within specific companies or sub-sectors within these groups can also contribute to their outperformance. 

By following financial news and staying updated on economic indicators, investors can get a clearer picture of the factors driving different sectors' performance in the stock market.

Kent Thune is Research Lead for etf.com, focusing on educational content, thought leadership, content management and search engine optimization. Before joining etf.com, he wrote for numerous investment websites, including Seeking Alpha and Kiplinger. 

 

Kent holds a Master of Business Administration (MBA) degree and is a practicing Certified Financial Planner (CFP®) with 25 years of experience managing investments, guiding clients through some of the worst economic and market environments in U.S. history. He has also served as an adjunct professor, teaching classes for The College of Charleston and Trident Technical College on the topics of retirement planning, business finance, and entrepreneurship. 

 

Kent founded a registered investment advisory firm in 2006 and is based in Hilton Head Island, SC, where he lives with his wife and two sons. Outside of work, Kent enjoys spending time with his family, playing guitar, and working on his philosophy book, which he plans to publish in the coming year.