The Pros And Cons Of Buying Us-focused Asx Etfs In The Current Environment

In a short amount of time, the US share market has erased the declines that it went through at the start of April. That may be reassuring for existing investors, but it may have put some doubt in prospective investors' minds about investing in US-focused ASX-listed exchange-traded funds (ETFs).

There are several different options for Aussies to consider, including the iShares S&P 500 ETF (ASX: IVV), the Betashares Nasdaq 100 ETF (ASX: NDQ), and the Global X Fang+ ETF (ASX: FANG). All three suffered a sizeable sell-off in the first week of April and have since climbed back above the values they traded at the start of April 2025.

When share prices were down significantly, I thought it was very clear that it was a great time to invest. However, following their rapid recovery, it's not as easy to know what to do.

I'm going to look at the positives and negatives of investing during this time in one of these US-focused ASX ETFs.

Negatives about investing in these ASX ETFs

The sell-off last month was caused by tariff decisions by the US administration. The recovery also seems to have been spurred by Trump's decision to reduce tariffs to 10% for most countries and the recent tariff reductions between the US and China.

While it's important not to get too wrapped up in economic commentary and geopolitical events, it is worthwhile noting that another negative tariff surprise could happen if the Trump administration doesn't agree to permanent deals – for now, the US and China agreement is described as temporary.

While tariffs have reduced, the US still has a 30% tariff rate on Chinese goods and a 10% minimum tariff rate on goods from most countries, including the UK, which has supposedly got a deal in the pipeline. To me, that implies cost increases for American households, and it's inflationary.

The last few months have revealed that it's unlikely the next four years will be incident-free with little volatility. Markets will need to get used to Trump's varying decisions, though any negatives may not be permanent, so any sizeable declines could be buy-the-dip opportunities.

Positives about investing in these ASX ETFs

For Australians who have most of their wealth invested in Australian assets (such as Australian-focused businesses or property), I think it's a good idea to invest in businesses that give exposure to companies from other countries.

While the FANG ETF, IVV ETF and NASDAQ ETF only invest in US-listed businesses, their earnings are generated from across the world. We can view them as global companies, in my view.

Not only do these ASX ETFs provide underlying diversification, but they're also among the strongest businesses in the world, in my eyes. I'm referring to companies such as Microsoft, Alphabet, Apple, Amazon, Nvidia, Meta Platforms, and so on. They are among the global leaders at what they do, continue to invest in their products and services, and generally have great profit margins and strong balance sheets.

Past performance is not a guarantee of future performance, but their excellent returns on equity (ROE) and returns on invested capital (ROIC) suggest to me that they can continue producing good results for investors. The main ceiling for long-term returns, in my view, is the revenue and earnings growth potential – how much further can they grow?

They still seem to have plenty of room to run, so I'd be very happy to invest in the US-focused ASX ETFs today. I wouldn't back up the truck at the current valuation (unlike the valuations a month ago), I'd just steadily invest each month using a dollar-cost averaging strategy.

The post The pros and cons of buying US-focused ASX ETFs in the current environment appeared first on The Motley Fool Australia.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. 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. 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, BetaShares Nasdaq 100 ETF, Meta Platforms, Microsoft, Nvidia, and iShares S&P 500 ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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 positions in and has recommended BetaShares Nasdaq 100 ETF. The Motley Fool Australia has recommended Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, 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.