Invesco QQQ monthly review

Overview

• For the month of November, QQQ’s NAV returned 4.69% underperforming the S&P 500 Index which returned 5.86%. The Russell 1000 Growth® Index outperformed QQQ which returned 6.65% along with the Russell 1000 Value® Index which returned 5.52%.
• QQQ’s underperformance vs. the S&P 500® Index was driven by its differentiated holdings and overweight exposure in the Technology sector. The lack of exposure to the Financials sector was the second largest detractor to relative performance. 
• QQQ saw inflow of $9.11 billion.
• QQQ ended the month with $316.97 billion in AUM and remained the 5th largest ETF in the US (based on AUM).
• For the month of November, shares traded of QQQ rose by 0.99% month-over-month along with notional value traded rising by 3.40% month-over-month.¹

Market Recap

While the month of October marked a period of uncertainty, November proved to be a period of strong conviction to the upside for equities as shown through the major indices’ performance. The uncertainty in October was illustrated by the increase from 16.73 to 23.16 on the VIX Index, a commonly used gauge for volatility, while the S&P 500 was down only 0.88%.² In November, we saw the VIX Index close at 13.51 while the S&P 500 posted its best monthly return of the year. U.S. Small-cap equities also posted strong performance for the month with the Russell 2000® Index returning 10.97%. The previous best monthly returns were 5.34% in February for the S&P 500 and 10.16% in July for the Russell 2000. Although the two primary events during the month were the U.S. Presidential Election and Federal Open Market Committee (FOMC) meeting, many investors continued to watch inflation and interest rate movement throughout the month.³

The first week of November proved to be an exciting one as both the U.S. Presidential Election and FOMC occurred within two days of each other. The two events contributed to the higher end-of-month VIX reading in October as many investors prepared for the potential of increased volatility. While some feared that the results of the general election would be delayed, the vote count was definitive enough for Kamala Harris to concede on the day following the election. Donald Trump became president-elect and won 312 electoral college votes. He also won the popular vote, 76.93 million for Trump vs. 74.45 million for Harris.

Equity markets moved up due to the election results with the S&P 500 rising 2.53% and QQQ’s NAV up 2.74% the day after the election. Small-cap companies were the clear winners with the Russell 2000 rising 5.84% on November 6th. From a sector perspective, the Financials sector rose the most the day following the election and returned 6.16%. Industrials, Consumer Discretionary and Energy also performed well each rising at least 3.50%.

The FOMC met for the following two days after the election and made their policy announcement on Thursday, November 7^th. Prior to the meeting, Bloomberg showed Fed Fund Futures had priced a nearly 100% chance of a 0.25% rate cut to the target rate.⁴ The Committee did announce the 0.25% cut which brought the target rate range to 4.50% on the lower end and 4.75% on the upper end. The FOMC cited the continued stability of the decrease in inflation along with economic activity remaining healthy. Fed Chairman Jerome Powell also stated that the unemployment remained at a reasonable level. However, he did iterate that if a large increase in unemployment was observed, the FOMC would be prepared to act accordingly.

In responses to questions, Powell went on to state that future policy had not been decided yet and any change in the target rate would be dependent on future data. Labor market data and inflation readings would continue to be the primary drivers of future decisions.

The October reading of Consumer Price Index (CPI) was released on November 12^th and came in line with expectations across the board.⁵ Year-over-year inflation was reported at 2.6%. This was higher than the prior reading of 2.4%. Core CPI, which excludes the costs of Food and Energy, continued to stay elevated above the headline reading and was announced at 3.3%. The largest contributor to the year-over-year reading continued to be a rise in costs in Core Services. There was also an increase in the cost of Food. The cost of Core Goods continued to fall, and the cost of Energy marked its third monthly decline in a row.

Similar to the previous reading, month-over-month CPI was in line with the prior month’s reading of 0.2%. The cost of Energy fell month-over-month only slightly and was the only detractor. Month-over-month Core CPI reading rose at a rate of 0.3%, in line with expectations and the previous reading.

Interest rates finally started to turnover as the S&P 500 traded near all-time highs in the second half of the month. The U.S. 10-year Treasury had been on a steady rise since the middle of September and reached as high as 4.50% on November 15^th. It ended up finishing November at 4.17%. The spread between the yields of the U.S. 2-year Treasury and 10-year continued to compress, a trend that coincided with the move in the 10-year since September.⁶ This spread finished the month at a 0.0135% difference, with the 10-year yielding slightly more than the 2-year.

QQQ Performance

From a sector perspective, Consumer Discretionary, Real Estate and Industrials were the best performing sectors in QQQ and returned 15.70%, 11.75% and 9.73%, respectively. During the month, these three sectors had average weights of 19.55%, 0.20% and 4.51%, respectively. The bottom performing sectors in QQQ were Health Care, Consumer Staples and Utilities which had average weights of 5.59%, 3.08% and 1.30%, respectively. Health Care returned -2.04%, Consumer Staples returned -1.29% while Utilities had a positive return of 1.47%.

Standardized performance - Performance quoted is past performance and cannot guarantee of comparable future results; current performance may be higher or lower. Visit invesco.com/performance for the most recent month-end performance. Investment returns and principal value will vary; you may have a gain or loss when you sell shares. Fund performance reflects fee waivers, absent which, performance data quoted would have been lower. Invesco QQQ’s total expense ratio is 0.20%. Index performance does not represent fund performance. Please keep in mind that high, double-digit and/or triple-digit returns are highly unusual and cannot be sustained.

QQQ’s underperformance vs. the S&P 500 was driven by its differentiated holdings and overweight exposure in the Technology sector. The lack of exposure to the Financials sector was the second largest detractor to relative performance. The ETF’s differentiated holdings in the Consumer Staples sector also detracted from relative performance.

Differentiated holdings and overweight exposure in the Consumer Discretionary sector was the largest contributor to relative performance vs. the S&P 500. This was followed by its underweight exposure in the Health Care sector and differentiated holdings in the Telecommunications sector.

QQQ’s overweight exposure to Tesla, Netflix and Costco Wholesale were the largest contributors to relative performance vs. the S&P 500. Tesla, Netflix and Costco Wholesale had average weights during the month of 3.74%, 2.26% and 2.62%, and returned 38.15%, 17.30% and 11.32%, respectively. Overweight exposure to Broadcom, PDD Holdings and Amgen detracted the most from relative performance vs. the S&P 500 for the month and had average weights of 5.01%, 0.48% and 1.03%, respectively. Broadcom, PDD Holdings and Amgen returned -4.53%, -19.93% and -10.93%, respectively.

Ever since April of 2023, Nvidia’s earnings announcements have been front and center for many investors. The semiconductor company has been one of the primary benefactors of the shift in focus to artificial intelligence (AI) with the company’s stock rising 398% from the end of April 2023 through November 2024. Nvidia reported earnings on November 20^th and beat analysts’ expectations for revenue and adjust earnings-per-share.⁷ Revenue was reported at $35.08 billion vs. the estimate of $33.25 billion while adjusted earnings-per-share came in at $0.81 vs. the estimate of $0.74. Data center revenue saw year-over-year growth of 112%, a slowdown from the previous announcement’s growth rate which stood at 154%. The company also continued to see revenue growth within the Gaming and Automotive segments. Research and Development spending, which may be used as a gauge for innovation, continued to grow and stood at $3.1 billion. Nvidia provided revenue guidance of $37.5 billion, with a potential variance of +/- 2%, for the next quarter. Bloomberg showed consensus estimates for next quarter’s revenue to be slightly above at $38.1 billion. Despite the strong results, the company’s stock was relatively flat the following day, November 21^st, rising only 0.53%.

While Tesla’s previous earnings announcement in October showed that the companies financials were improving, the EV maker’s stock rose over 38% in November. Much of the performance was attributed to the results of the U.S. Presidential election and the company’s CEO’s, Elon Musk, support of Donald Trump. Some investors believed that the new administration may create a more favorable regulatory environment for Tesla. Also, Elon Musk, along with Vivek Ramaswamy, was chosen by the President-elect to lead a new group named the Congressional Delivering Outstanding Government Efficiency Caucus (DOGE Caucus) whose purpose will be to make government spending more efficient. While this appointment was not directly linked to Tesla, Musk’s support of Trump was viewed as positive for the company’s stock.

Atlassian’s most recent earnings announcement was on October 31^st, and saw the market react positively on the following day, November 1^st. The enterprise software company reported revenue of $1.19 billion beating the consensus estimate of $1.15 billion. Adjusted earnings-per-share also beat the estimate of $0.65 coming in at $0.77. These results equated to year-over-year growth of revenue and adjusted earnings-per-share of 4.97% and 16.67%, respectively. The positive results were much welcomed since the company had seen negative year-over-year growth of both metrics in the previous quarter. The increase in revenue was driven by growth in subscription revenue. Similar to other software companies, Atlassian highlighted artificial intelligence powered software such as Atlassian Focus and Rovo. The company remained positive on their continued investment into artificial intelligence and the potential for future growth in data centers and cloud computing.

Trading Stats

For the month of November, shares traded of QQQ rose by 0.99% month-over-month along with notional value traded rising by 3.40% month-over-month. The month saw an average of 28.99 million shares trade each day (vs. 28.71 million last month) for a value of $14.56 billion (vs. $4.08 billion last month). That compares to averages of 65.91 million shares and $6.38 billion over the life of the fund, and 38.22 million shares and $17.17 billion for the past 12 months.