Vanguard’s Hidden Opportunity in a Beaten-Down Sector

Vanguard is known for its low-cost, no-fuss ETFs and when it comes to equity investing, they offer a lineup of about 50 stock-focused funds that make it easy to diversify with a single ticker.

One of the more cyclical areas of the market is consumer discretionary and it’s been getting hit hard in 2025.

When the economy is strong and rates are low, people tend to spend more on non-essentials, from dining out to travel and home upgrades. But when interest rates rise and recession fears kick in, spending slows and so does this sector, so why even consider an ETF exposed to it? Read on…

Key Points

• Amazon and Tesla, which make up over 35% of the fund, are the main drivers of the decline.

• Travel, retail, and restaurant stocks have also fallen, making consumer discretionary the worst-performing sector in 2025.

• The sector rebounds strongly after downturns, offering opportunity for patient, risk-tolerant investors.

Is This Consumer ETF Worth the Risk?

Right now, the Vanguard Consumer Discretionary ETF (VCR) is down almost 19% year to date, making it the second-worst-performing Vanguard fund in 2025, just behind their small-cap value ETF. But that kind of drop could be a long-term opportunity.

So, what’s dragging it down?

It’s not your typical retailers or restaurants. The real culprits are Amazon and Tesla, which make up more than 35% of the fund combined.

But it’s not just those two. Travel stocks have taken a hit too with Royal Caribbean, Carnival, and Norwegian Cruise Line all crumbling under consumer spending concerns. Nike and Lululemon have plunged by as much as 30% and then some.

So, while the spotlight is on Amazon and Tesla, the broader weakness across travel, apparel, and restaurants has made this sector the worst performer in 2025, even slightly worse than tech, which is saying something given the steep drop in names like Apple and semiconductor stocks.

Why It Still Might Be a Buy?

Consumer discretionary stocks are like a rollercoaster — they soar when the economy is strong and sink just as fast when it’s not. That volatility makes them tricky in the short run, but they can be seriously rewarding over time.

Case in point: Between 2023 and the end of last year, the S&P 500 climbed about 1.5x. But consumer discretionary stocks did even better, jumping 1.73x — outpaced only by tech and communications, thanks to big names like Meta, Alphabet, and Netflix.

When the economy rebounds, this sector tends to snap back even harder.

Is the ETF a Buy Right Now?

If you’re planning to hold for the next ten years or more and can handle some choppiness, this sector is a smart place to focus but if you already own the Mag 7 stocks, Vanguard’s ETF might not be the best fit because it’s so heavily concentrated in a few big names.

Instead, look around to perhaps the Vanguard S&P 500 ETF (VOO) which still includes Amazon and Tesla, but with broader exposure to many industries and more diversified holdings among the super market capitalizations and growth stocks.