Vanguard Financials ETF

VFH

Market cap $12.8B

The first rate cut of the year gives investors the opportunity to position their portfolios to capture future upside in certain sectors, should further cuts occur. History has an uncanny ability to repeat itself, and it's telling us that we should target the financial sector.

Big banks??? earnings surge, resilient deal activity, and favorable valuations put focus on financial ETFs like XLF, VFH, KBWB and IYF.

The Vanguard Financials ETF (VFH) was launched on January 26, 2004, and is a passively managed exchange traded fund designed to offer broad exposure to the Financials - Broad segment of the equity market.

VFH posted strong Q2 results, with robust earnings growth and high beat rates, driving a 10% rally since my initial buy call. Valuation remains attractive at a 16.3x P/E and a modest 1.54x PEG, with a solid 1.73% dividend yield and large-cap value exposure. Technical momentum is healthy, but I note a caution flag due to negative RSI divergence and weak seasonality in August-September.

In the midst of many companies' mid-2025 earnings reports, names from the financials and tech sectors have stood out, as have firms from the aerospace and defense industry. It's common for investors to respond to earnings info by buying or selling shares of individual companies, but those bullish on these broader categories may find that a targeted exchange-traded fund (ETF) is an easy way to gain exposure to a larger segment of the market that is primed for success.

With nearly 40% of S&P 500 companies having reported their Q2 earnings, the overall picture is one of continued strength and steady improvement. Sector ETFs like VFH, XLK, XLY and ITA are in sweet spots.

VFH, XLK, XLY and ITA ETFs may benefit as strong Q2 earnings and rising Q3 estimates boost sector optimism.

Key Points in This Article: The U.S.

Investment management firm Vanguard offers 11 low-cost exchange-traded funds (ETFs) that mirror the performance of each stock market sector.

Most U.S. banks raised their dividend payouts as top U.S. banks passed the Fed's stress test with strong capital. Play ETFs like KBWB, XLF and VFH.