Why it still makes sense to invest in the iShares S&P 500 ETF (IVV) during the trade war

The iShares S&P 500 ETF (ASX: IVV) has suffered a significant dip since 31 January 2025, it's down 13.7%, as the chart below shows.

There are plenty of exchange-traded funds (ETFs) on the ASX to choose from, and I often call the IVV ETF one of the best ideas to consider.

However, the recent announcements by the US administration have put the question in some investors' minds of whether the US dollar, US stocks and US bonds are as stable and appealing as they were a few months ago. Tariffs on most goods from most countries has increased uncertainty on what's going to happen with the US and global inflation and the economy.

Despite all of that, I believe the IVV ETF is still a compelling investment for the long-term. Let me explain why I'm still optimistic about it.

It's still extremely low cost

One of the main attractions of this fund has been the incredibly low management fee, and that remains the same.

It still has an annual cost of 0.04%, which means all of the gross returns generated by this fund stay in the hands of investors in the form of net returns.

While costs aren't everything, they play an important part in long-term returns. The effect of fees on wealth can have a negative long-term compounding impact.

Excellent, global businesses

There is uncertainty in the air about how much the US economy will grow in the shorter-term and what could happen to inflation and costs. But, the businesses inside the IVV ETF are still the same names as they were a few weeks ago.

Those names include Apple, Microsoft, Nvidia, Amazon.com, Meta Platforms, Alphabet, Berkshire Hathaway, Broadcom, Tesla, JPMorgan Chase, Eli Lilly and Visa.

These businesses earn a significant chunk of their profit in the US, but they also make substantial money outside of the US. I believe their earnings are more diversified than what some investors are giving them credit for.

I think global demand for smartphones, computer software (and hardware), online video, non-cash payments, cloud computing and so on will continue to grow in the longer-term, and therefore the earnings of these companies could rise, justifying future gains and returns for investors.

Cheaper valuation

I'd rather buy good businesses at a cheaper price than a higher price.

We're being presented with a lower price because of the tariff trade war – share prices don't usually drop for no reason.

It can take a certain amount of bravery to invest when there's fear and anxiety in the market, which is affecting investor confidence.

With the IVV ETF down 14% in just a couple of months, I think this could be a good time to be a contrarian investor (with a long-term mindset).

The post Why it still makes sense to invest in the iShares S&P 500 ETF (IVV) during the trade war appeared first on The Motley Fool Australia.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. JPMorgan Chase is an advertising partner of Motley Fool Money. Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon, Apple, Berkshire Hathaway, JPMorgan Chase, Meta Platforms, Microsoft, Nvidia, Tesla, Visa, and iShares S&P 500 ETF. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended Broadcom and has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Alphabet, Amazon, Apple, Berkshire Hathaway, Meta Platforms, Microsoft, Nvidia, Visa, and iShares S&P 500 ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2025