This Vanguard ETF Outperforms the Market in 2025
After years of lagging behind U.S. equities, international stocks are staging a remarkable comeback in 2025.
This rebound comes as U.S. markets struggle under the weight of rising inflation, trade tensions, and growing economic uncertainty under the new administration. Increased volatility and the threat of new tariff policies have added to investor unease, sending all three major U.S. indexes into the red, with the S&P 500 down more than 4% year-to-date.
Meanwhile, international markets especially in Europe are benefiting from fiscal stimulus, rising defense spending, and more favorable valuations. As investors seek both growth and diversification outside the U.S., global equities are drawing renewed interest.
Leading this rotation is the Vanguard FTSE Europe ETF (NYSEARCA:VGK), which has emerged as the best-performing Vanguard index fund so far this year.
VGK has climbed nearly 11% year-to-date and is currently trading at $70.39, significantly outperforming its U.S. peers. The Vanguard FTSE Europe ETF tracks the FTSE Developed Europe All Cap Index and provides investors with broad exposure to developed markets across Europe. The fund holds 1,263 stocks spanning key sectors such as technology, healthcare, and consumer staples. Among its largest positions are German software firm SAP SE, Dutch semiconductor equipment maker ASML Holdings (NASDAQ:ASML), and Danish drugmaker Novo Nordisk (NYSE: NVO).
Much of VGK’s recent momentum can be attributed to Europe’s strengthening macroeconomic landscape. Inflation has eased to 2.2%, while interest rates have been cut to 2.5%, with another reduction likely before year-end.
Still, VGK’s outlook is not without risk. Geopolitical uncertainty and global trade tensions persist, particularly surrounding the Russia-Ukraine conflict and the potential for new U.S. tariffs on European imports, which could weigh on future returns.
For instance, the European Union is expected to be hit with a new round of U.S. tariffs this week, including a 25% levy on imported vehicles. While the full impact of these measures remains unclear, the retaliatory actions could stoke inflation and disrupt trade, posing headwinds for European equities.
Despite its strong short-term performance, VGK’s long-term track record has been more modest. The fund has delivered an annualized return of 5.95% over the past decade and an average return of 5.33% since its inception in 2005.
That being said, VGK remains a cost-effective choice with an expense ratio of just 0.06%, meaning a $1,000 investment would incur only $0.60 in annual fees—making it one of the most efficient ways to gain exposure to European equities.
Featured image via Shutterstock
