What Australian should know about Trump's VP Pick JD Vance and his ETF portfolio

JD Vance's investment strategy, which heavily leans towards broad-based ETFs, indicates a conservative, well-diversified approach aimed at capturing the overall market's performance. The gains in QQQ, SPY, and DIA this year—21.5%, 19.6%, and 9.66% (YTD, as of July 17) respectively—signal a robust US market recovery. This momentum could gain further strength with political stability and pro-business policies under a potential Trump-Vance administration.

Moreover, with the potential for the US Federal Reserve to cut interest rates in September, the US dollar is likely to weaken. A weaker dollar generally boosts the price of gold, making it more attractive for investors holding other currencies. Lower interest rates typically increase the appeal of risk assets, such as equities and crypto. Both Trump and Vance have shown support for crypto, which could further enhance confidence in this asset class. Interest rate cuts also lead to higher bond prices. When interest rates fall, the yields on existing bonds become more attractive, driving up their prices.

JD Vance takes a tough stance on China, advocating for an economically nationalist approach that prioritizes US manufacturing, even at the expense of GDP growth. In the Senate, he co-sponsored the China Trade Relations Act to revoke China's permanent most-favored-nation status, underscoring his support for American manufacturing. Vance argues that the US should shift its focus from Ukraine to China, which he views as the real enemy. This tough stance on China could pose risks for Australian investors, given Australia's significant economic reliance on the Chinese market. Australia's trade relationship with China is substantial, as China is its largest trading partner. Any severe economic policies against China could negatively impact Australia's exports, particularly in sectors like mineral resources and agriculture.

Given these potential risks and opportunities, Australian investors might consider taking inspiration from JD Vance's investment approach to diversify portfolios.

For Australian investors, buying US-listed ETFs (e.g., SPY.US) directly versus buying ASX-listed ETFs (e.g., SPY.ASX) for US exposure can offer difference advantages:

Higher Liquidity: US-listed ETFs generally have higher liquidity compared to their ASX counterparts. Higher liquidity often translates to tighter bid-ask spreads, making it easier and cheaper to buy and sell large amounts of shares without significantly impacting the price.

Access to Real-Time Market Movements: Investing directly in US-listed ETFs allows you to participate in the US market in real-time. This can be crucial for taking advantage of short-term opportunities and reacting to market news as it happens.

No Currency Risk: When you invest in US-listed ETFs, your returns are subject to fluctuations in the AUD/USD exchange rate. Investing in ASX-listed ETFs that replicate US indices may mitigate this currency risk, as they are traded in AUD.

Trading Hours: US-listed ETFs trade during US market hours, which may not be convenient for Australian investors due to the time difference. ASX-listed ETFs trade during local market hours, providing more accessible trading opportunities.