Buy, Hold, or Sell VOO at $650?

The Vanguard S&P 500 ETF (NYSEARCA:VOO | VOO Price Prediction) surged back over $650 quickly after the ceasefire went into effect and has held at that level after it was extended. The question now is whether or not it can hold at that level for too long. Plenty of things can go wrong from here as the Strait of Hormuz remains blocked. For the global economy, nothing drastic has changed, and it may be even worse since the blockade on Iran now causes even less oil to flow into global markets.

BlackRock CEO predicted a global recession if oil went above $150. If you Google the current oil price, you might be reassured looking at futures prices, but there is a divergence between actual spot oil prices and futures. Brent crude briefly went above $138 on April 7, and it has climbed over $103 as of this writing as the ceasefire looks fragile.

On the other hand, there’s always a chance that a peace deal is made, in which case the markets are almost guaranteed to jump euphorically. Is VOO worth it in this environment?

Why VOO?

There’s no shortage of S&P 500 ETFs on the market, and some are even cheaper than the VOO. You can also shift out of the S&P 500 itself and hold the Dow or the Nasdaq. If you have a new portfolio, it’s a good idea to look into why exactly you should buy the VOO and not some other S&P 500 ETF.

The VOO is popular because the expense ratio you get here is just 0.03%, or $3 per $10,000. That’s exceedingly low, and other ETFs like the iShares Core S&P 500 ETF (NYSEARCA:IVV) do match that expense ratio. The SPDR S&P 500 ETF (NYSEARCA:SPY), the ETF with the most volume, has over three times that expense ratio at 0.0945%.

It may seem like nitpicking over a couple of dollars on the surface, but all of this money does add up.

Let’s assume an 8% return from the S&P 500 annually per year. And let’s say you invest $50k flat and let it sit for 40 years. Even discounting additional investments, that’s going to reach $1.086 million in 40 years. Assuming a 7.97% return (VOO’s 0.03% excluded), you will reach $1.074 million.

Now let’s assume a 7.91% return by excluding the SPY’s fees. In this case, your final value drops down to $1.05 million. You’re losing out on nearly $25k by choosing the wrong S&P 500 ETF for long-term investing.

You can cut down on fees even more, but VOO is as good as it gets since cheaper ETFs don’t have as good liquidity.

Does it all boil down to Hormuz?

Whether VOO goes up or down depends entirely on how this conflict resolves. We’re seeing tit-for-tat seizures of ships, and this could either escalate further. Things have gotten worse, not better. Oil is likely to climb back to new highs without the strait opening.

The S&P 500 already prices in a full recovery and is near all-time highs and is up over 8% in the past month. It’s normal to be skeptical of another big move like this in the near term, but that’s absolutely possible if there’s a spontaneous peace proposal. The market hasn’t punished bearish news significantly and tends to overperform once it slides out of headlines.

When it comes to Hormuz, however, the market can’t do the same for a long time. Higher oil prices will lead to broad-based pain. There’s no way to ignore that like the market did for tariffs last year once it stopped being trendy.

Why I’d still buy VOO

The U.S. is self-sufficient in oil and the current oil crisis is being felt disproportionately in Asia, not in North America. A $1 increase at the gas pump isn’t devastating news yet. Sure, companies on thin margins will bear the brunt of higher oil prices, but the ongoing rally is thanks to the AI boom. There’s too much momentum baked into AI for it to stop, unless oil prices reach truly apocalyptic levels.

The short-to-medium term is truly unpredictable due to where this crisis goes.

Nevertheless, I am bullish long-term because this administration won’t watch the market tumble because of Iran. If there’s a 15-20% correction from here, expect a U-turn akin to the tariff “pauses” in 2025.