Update your settings.json with the code below, then restart vscode:
{
"files.exclude": {
"**/.git": true,
"**/.svn": true,
"**/.hg": true,
"**/CVS": true,
"**/.DS_Store": true,
"**/tmp": true,
"**/node_modules": true,
"**/bower_components": true,
"**/dist": true
},
"files.watcherExclude": {
"**/.git/objects/**": true,
"**/.git/subtree-cache/**": true,
"**/node_modules/**": true,
"**/tmp/**": true,
"**/bower_components/**": true,
"**/dist/**": true
},
"search.exclude": {
"**/node_modules/**": true,
"**/bower_components": true,
"**/dist/**": true,
"**/tmp/**": true,
"**/.git/objects/**": true,
"**/.git/subtree-cache/**": true
}
}