After two years of double-digit gains and even a decent start to 2025, the S&P 500 index (^GSPC 0.59%) reached a stumbling block in recent weeks. That came in the form of President Donald Trump's plan to slap tariffs on imports from around the world.
Economists warned this could result in higher prices for U.S. consumers and companies, even potentially leading to a recession. Investors listened and, concerned about what's next, some fled stocks -- particularly growth stocks that are most sensitive to economic trends.
All of this weighed on the S&P 500, bringing it to a 16% decline from the start of March through its low point on April 8. Since then, the famous benchmark has started to show signs of recovery amid certain bits of positive news.
For example, Trump paused his tariff plans for 90 days to allow for negotiations with various countries. In an interview with Time Magazine, he said he's already struck 200 tariff deals. The president also has temporarily exempted electronics from tariffs.
These moves have sparked investor optimism, helping the S&P 500 to recoup about half of its recent loss. Of course, it's still too early to say whether the index will continue higher uninterrupted, as tariff or corporate earnings news to come could either support this momentum or push the index lower.
However, history shows that, no matter what happens in the near term, major benchmarks always have gone on to gain over the long term. Below, I'll check out the best way to bet on an S&P 500 rebound -- whether it happens now or later.
Image source: Getty Images.
Investment in many companies
To benefit from an S&P 500 recovery and eventual gains, you'll want to be invested in many companies that are in this index. This means you have to carefully choose companies you think will lead the increase. This is a good idea today, particularly since so many stocks are trading at dirt cheap levels after falling so much.
However, this strategy takes some time as you'll need to study the various companies and industries. You'll also potentially need a good deal of financial resources if you aim to buy many full shares, rather than fractional ones.
Don't be discouraged, though, because there's another strategy available that allows you to invest in all of the S&P 500 companies with one simple purchase. This is by investing in an exchange-traded fund (ETF) that tracks the benchmark, and a fantastic one is the Vanguard S&P 500 ETF (VOO 0.52%).
ETFs are designed to help you bet on a particular theme, from an investment strategy, like dividend growth, to an industry such as technology or an index like the S&P 500. Their compositions mimic a particular benchmark -- in this case the S&P 500 -- and, therefore, they also mimic that benchmark's performance.
You can buy an ETF as you would a stock as they trade daily -- just like stocks. It's easy for an investor familiar with trading stocks to jump effortlessly into ETF investing.
The only difference to be aware of is that ETFs, unlike stocks, come with management fees -- you'll see them noted as expense ratios. It's important to stick to ETFs with an expense ratio of less than 1% in order to keep your expenses low over time.
A great time to buy
The Vanguard S&P 500 ETF, thanks to its exposure to all of the companies in the benchmark, will help you benefit from the index's rebound and eventual gains. Now, as the S&P 500 starts to climb but is still off its peak, it's a great time to get in on an ETF that tracks its performance.
The Vanguard ETF is down about 10% from a peak reached in February, as many of the' share prices and valuations of the companies in the index have dipped -- and this offers you an interesting entry point. Though certain companies may remain pricey, especially considering potential revisions to earnings expectations, plenty of S&P 500 companies are undervalued and should lead the overall index higher over the long run. By investing in the Vanguard ETF, you'll automatically benefit as these strong companies soar.
Finally, a quick note about the timing of the S&P 500 rebound. It could continue in a somewhat linear manner if corporate news and tariff updates are positive, and that would be great. But if it doesn't, don't worry.
As I mentioned earlier, over time, the index always has advanced, so if you invest in the Vanguard ETF now, you'll set yourself up to benefit from any potential recovery in the near term. Even better, you'll position your portfolio for a spectacular win over the long run.
