This TabStocks article analyses the Vanguard stock and evaluates whether VUSA is a good investment in 2022
Stock Name and Trading Stock Exchange Platform
Vanguard S&P 500 UCITS ETF – London Stock Exchange (LON: VUSA)
The Stock Sector
VUSA is an index fund that tracks the performance of stocks in US S&P 500 stocks. It is owned by the Vanguard asset management wing.
The Vanguard group is an asset management and I vestment advisor with over $7 Trillion global assets under management.
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VUSA is the UK counterpart of the US VOO ETF. They both are managed by Vanguard, but slightly differ in their operations and size, with VOO (NYSE) being slightly larger. VUSA tracks the S&P 500 by investing in all of the securities in the index.
The index has over 500 stocks under its track as per the latest data. The inception of the fund was back on 22 May 2012. Vanguard was founded in 1975 by John C Bogle.
Recent News on VUSA
The fund did exceptionally well in the last two years with an average rate of return of 55% from April 2020 to March 2021.
This has however declined as the market experienced correction early this year 2022 and is showing signs of doing so again, due to increased interest rates.
It was a good return for investors in the past year and investors have often bought the overall index as a long-term strategy to hedge against volatility.
The index is still considered by others to be the gold standard in terms of investment options in the market.
The wise Warren Buffet has vouched for investing in the S&P 500 index. This has done well in the past decade, beating other funds.
The stock market is running wild at the moment and has been in the red for most of the year, it has occasionally risen to outperform other asset classes.
With rising interest rates, equities have come under the threat of collapse. This move by the Fed has led to rising bond yields which has hammered the stock market.
The fund is down following the uncertainties in the market but is promising to rebound. VUSA is highly regarded by investors because it gives them the power to invest themselves.
Other similar vanguard funds like VUAG and VOO have performed better than VUSA.
Current position of VUSA
VUSA is a distributing fund that pays dividend to investors making it very attractive. It is currently worth over $32.5B in total.
VUSA is a low-cost ETF tracking the S&P. The Russian-Ukraine conflict has impacted the index negatively.
While Crude oil futures have grown stronger due to the hike in oil prices, majority of other stocks have dropped following halted operations in Russia.
This has dragged down the entire market which has affected the indices invested in them. The dollar has become stronger with tight fiscal policies like increasing interest rates.
The equities market has been favored by the financial policies in the last decades. From 1971 when the dollar was taken off the gold standard, a greenlight to rally was granted to stocks.
Capital became cheap as it could be issued as deemed necessary by the central banks (quantitative easing). Before this period stocks were considered a risky play.
ETF’s were even riskier and dangerous. The bond market was king and that is where smart investors were.
Fiat flowing into the system caused the stock market to rise exponentially. More leverage was given to these stocks as mutual funds and pension funds were tied to the equities market.
This spurred the greatest wealth boom in history, but it has not come without its share of perils. Riches have been earned at the expense of the cash holdings of the saver.
Saving depreciated enormously, as cash became trash and the asset classes were the value store. As inflation rises, assets appreciate while the value of money is eroded.
This debauchery of fiat currency has caused it lose at least 95% to date, in comparison with the 70’s. The stock market has now become the backbone of the economy.
As the stock market goes so does the wealth and health of the world. VUSA and other indexes have capitalized on this to make significant gains.
VUSA has performed well over the years with occasional lows, the highs were seen in the recent COVID bubble which pushed the stock market higher after the market was bailed out.
The S&P 500 has tanked this week to pandemic levels. This is a fall that has was witnessed in March 2020 with the market crash.
VUSA has gone down with the index although optimism still remains. This is because some stocks have done better despite the fall and this could boost the index in the future.
Tech stocks have particularly held up the index in the course of its history. This is showing signs of faltering as tech stocks have been in the red. Earnings season has finally arrived and all the big tech have released their quarterly reports.
Earnings have been relatively strong, but supply chain issues and other feared events in the future has caused investors to worry about big tech.
Only Microsoft ($MSFT) and Meta($FB) are still positive, the rest like Apple, Amazon and Google have dwindled.
It is anticipated that this will continue in light of higher rates and rising inflation. VUSA is therefore in a tricky position at the moment.
VUSA Stock Price Chart
As of 25 April 2022, VUSA was trading at £63.98, down by -1.44%. It has traded at a day range of £62.8 to £63.32.
The index has traded at a year high of £67.93 and an annual low of £54.4. The upsurge in price last year was due to the market bubble.
Stimulus injected to the economy, caused asset inflation in the equities market.
More than 50% of cash circulating the globe was printed in the last two years.
This thus did not justify the high share prices recorded by the index. The volume of shares traded now sits at 323.70K, which is a significant decrease as the price fell.
Sentiment on VUSA
The dollar is now at its strongest in two decades.
From the start of this year 2022 it has gained at least 7% value according to experts. The dollar is returning to it helm as king and the reserve currency of the world due to the hawkish activity of the Federal Reserve.
VUSA is held in low regard by serial investors right now. During times of rising interest rates, cash is king. High yielding investments are regarded as the best option.
Many believe REITS (Real estate investment trusts) tend to do better at this moment and many have started showing signs of rallying.
Vanguard is one such index that is the benchmark for monitoring the REIT market. This is known as VNQ (Vanguard Real Estate ETF).
Investors are recommending this asset class over equities, with many REIT’s emerging that claim they can beat the Vanguard benchmark.
VUSA will follow the direction of the S&P thus not very reliable. If the trend changes stocks could be back on a bull-run but this looks highly unlikely.
Stocks are way overvalued at the moment and so are the indexes.
The S&P might be at the end of its run, signified by the falling action. Its close associate, the NASDAQ has plummeted a decade low, recorded only during the 2008 financial recession.
This is a stern warning.
Profits for VUSA
The vanguard group posted a revenue of $6.936B in 2020. Their financials from there remain undisclosed.
VUSA keeps track of the index and does attract capital, thus this is invested by Vanguard in what they foresee as profitable investments.
VUSA is an index therefore it unknown how proceeds received are invested to generate profit. The fund is however ranked on how it returns in terms of trading price.
An influx into the fund also gives the fund more leverage to further receive cash flow and re-invest. It did not issue dividend this year, but it did a 1.22% yield in the last year.
Future of VUSA
The future is looking very grim for the index and the general equities market as a whole.
Shorting these indexes would have been a wise move by traders. They knew they were overvalued.
They are still overvalued at this point and an imminent crash is due in the decade.
This will be catastrophic and will wipe out entire companies and other funds. The idea of a market that always goes up is unreal.
The dollar is in control at the moment as other nations have not raised their interest rates.
As hyperinflation becomes a living reality, this will force higher interest rates by the rest of the world.
Overall verdict on VUSA
The Japanese stock market is the perfect epitome of how possible a crash is in the market.
It is down by over 80% from the latter century and has not yet rebounded to date.
If a similar occurrence is to happen in the US, it could be the beginning of the second great depression.
VUSA is very bearish at the moment and in the long-run. Moving averages indicate a sell and so do oscillators. It is an average strong sell.
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