Invesco QQQ monthly review

Overview

• For the month of January, QQQ saw an NAV total return of 2.23% and underperformed the S&P 500 Index which returned 2.78%. The Russell 1000 Growth Index returned 1.97% and underperformed while the Russell 1000 Value Index outperformed after it advanced by 4.63%.
• QQQ’s relative underperformance vs. the S&P 500 was driven by its lack of exposure to the Financials sector and its underweight exposure and underperformance to the Industrials sector. Overweight exposure and outperformance within the Consumer Discretionary sector was the biggest contributor to relative performance vs. the S&P 500 Index.
• QQQ saw inflow of $703.29 million.
• QQQ ended the month with $326.54 billion in AUM and remained the 5th largest ETF in the US (based on AUM).
• For the month of January, shares traded of QQQ rose by 13.31% month-over-month along with notional value traded rising by 12.33% month-over-month.¹

Market Recap

Equities started the year on a choppy note with negative returns through the middle of the month. After a favorable Consumer Price Index (CPI) report equities bounced back and finished in positive territory for the month.² Gains were widespread, with Large-cap growth (Invesco QQQ and the Russell 1000 Growth® Index), large-cap core (S&P 500 Index and Russell 1000 Index) and large-cap value (S&P 500 Value Index and Russell 1000 Value Index) all advancing for the month. Mid-cap (S&P 400 Index) and small-cap (S&P 600 index) also finished in positive territory for the first month of 2025. Earnings reports were also in focus towards the end of the month, as 2024, the Magnificent Seven companies reported their calendar Q4 results.³

Volatility see-sawed during the month, with the VIX Index climbing from 17.35 on December 31, 2024, to a high of 19.54 on January 10.⁴ The gauge dipped below 15 on January 24 before climbing in the last week of the month to finish at 16.43. 

The labor market continued to show resiliency with all five weekly releases of Initial jobless claims remained under 225K. The readings were all firmly below the 300K level which is generally viewed as the difference between an improving and deteriorating labor market. Additionally, the December Change in Nonfarm payrolls report was released on January 10 and showed that 256K jobs were added in the prior month.⁵ The reading surpassed economist estimates of 165K. The December unemployment rate was released on the same day and unexpectedly fell to 4.0%, below the previous reading and average economist estimate of 4.1%. 

QQQ enjoyed its best performance day of the month on January 15, advancing by 2.30%, after the release of the December Consumer Price Index (CPI) report. While the headline numbers showed a slight acceleration of November, they were in line with expectations. The year-over-year figure rose by 2.9%, up from 2.7% in November while the month-over-month number climbed by 0.4%, up from the 0.3% increase in November. Market optimism seemed to stem from the core readings, which excludes the more volatile food and energy components, as they showed deacceleration from November and were reported below economists’ expectations. On a month-over-month basis, core CPI advanced by 0.2%, lower than the 0.3% increases seen in the November, October, September and August readings. The 0.2% reading was better than the average economist estimate for 0.3% growth. On a year-over-year basis core CPI decelerated to 3.2%, down from the 3.3% year-over-year readings observed in the November, October and September report. The 3.2% year-over-year reading was better than the 3.3% average economist forecast.

The Federal Open Market Committee (FOMC) held its first meeting of 2025 from January 28-29 and kept the Federal Funds target rate steady at 4.25% – 4.50%.⁶ This ends the streak of three consecutive meetings with a rate cut, after the Federal Reserve (Fed) began its rate cutting cycle at the September 2024 meeting. Many viewed the action as a “hawkish hold” as language in the Fed’s statement regarding prices changed. The phrase referring to the Fed making progress towards the 2% inflation goal was amended to say that inflation remains elevated. The statement also referenced the continued strength in the labor market by mentioning that “The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid.” 

In the press conference immediately following the meeting, Fed Chairman Jerome Powell gave insight about the committee’s stance regarding future monetary policy. He noted that the committee will need to see weakness in the labor market, or real progress on inflation before making further adjustments to the target rate. Chairman Powell noted that the Fed’s review of its monetary policy should be finished by the summer, and that its 2% long-term inflation target will not change and is not a part of the review. 

The FOMC’s preferred inflation measure, the US Personal Consumption Expenditures (PCE), was reported two days after the FOMC’s meeting concluded on January 31.⁷ Both the headline and core readings on a month-over-month and a year-over-year basis were in-line with expectations. Month-over-month headline PCE was reported at 0.3%, up from 0.1% in November while the year-over-year reading came in at 2.6%, up from the 2.4% reported in November. The Fed tends to focus on the core reading, as it excludes the more volatile food and energy components. Month-over-month core PCE rose at a rate of 0.2%, higher than the November reading of 0.1% while the year-over-year core PCE advanced by 2.8%, in-line with the November reading.

QQQ Performance

From a sector perspective, nine of the ten sectors that QQQ has exposure to finished in positive territory for January. Utilities and Health Care were the best performing sectors in QQQ up 15.15% and 7.50%, respectively. Utilities averaged a 1.36% weighting in QQQ for the month and Health Care averaged a 5.09% weight in QQQ for January. The bottom performing sectors in QQQ were Consumer Staples and Technology. Consumer Staples was the only sector to finish in negative territory in QQQ for the month, declining by 0.05% and had an average weight of 2.78% in QQQ. Technology advanced by 0.45% with an average weight of 59.32% in QQQ for January.

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 lack of exposure to the Financials sector, which advanced by 6.49% in the S&P 500 Index with an average weight of 10.65% for the month. Underweight exposure to the Industrials sector also weighed on relative performance as the sector averaged a 4.56% weight in QQQ and returned 4.02% vs. an 11.71% average weight in the S&P 500 Index with a 5.36% return.

QQQ’s overweight exposure to Meta Platforms, Amazon.com, and Netflix were the largest contributors to relative performance vs. the S&P 500. Meta Platforms, Amazon.com, and Netflix had average weights in QQQ for January of 3.46%, 6.07% and 2.41%, and returned 17.71%, 8.34% and 9.59%, respectively. Overweight exposure to NVIDIA, Apple and Microsoft detracted the most from relative performance vs. the S&P 500 for January and had average weights of 8.53%, 9.10% and 8.12%, respectively. NVIDIA, Apple and Microsoft returned -10.59%, -5.76% and -1.53%, respectively.

Netflix announced Q4 earnings on January 21 and beat EPS and revenue estimates. Revenue was reported at ~$10.25 billion, better than analysts’ estimates of ~$10.11 billion. The revenue figure represents 16% year-over-year growth. Earnings per share came in at $4.27, 2% better than the average analyst expectation of $4.18, and represents 102% growth on a year-over-year basis.⁸ Subscriber growth was a huge bright spot, as the digital entertainment giant, announced that they added 18.9 million new subscribers in the quarter, the largest subscriber gain in its history and more than double analyst expectations. The company also announced price hikes across a number of markets, including the US. Netflix 2025 revenue guidance was announced at $43.5 – 44.5 billion, higher than its earlier forecast and better than estimates. Shares of Netflix surged by 9.69% in the session immediately following the announcement.

Arm Holdings was the second-best performing stock in QQQ for January, after it advanced by over 29% for the month. On January 22, shares rallied by 15.93% following the announcement of Project Stargate, an Artificial Intelligence (AI) infrastructure joint venture. It was reported that the venture, led by SoftBank, Oracle and Open AI is designed to support buildout of AI infrastructure for OpenAI like datacenters with a preliminary investment of $100 billion. That investment is expected to balloon to over $500 billion. Arm Holdings is majority owned by SoftBank, and other names involved in the deal rallied on the news. Various energy companies also advanced as the perceived buildout of future datacenters will also likely lead to an increase in energy consumption. The daily return was Arm’s best since February 12, 2024.

During the back half of the month, the release of Chinese startup DeepSeek’s most recent models caused a ripple effect across AI-related stocks. One week after the release, DeepSeek’s AI Assistant rose to the top of Apple’s AppStore, replacing ChatGPT. Reports swirled that training costs for one of the models was below $6 million. Many noted that the models are comparable with (or have even surpassed) some of the most advanced models in the market like ChatGPT or Llama. This caused widespread selloffs across US stocks, as investors extrapolated that there is a risk of significantly lower spending on semiconductors and data center buildouts. In reaction, we saw some notable decliners for the last week of the month. Some of the largest decliners within QQQ included NVIDIA (-15.81%), Micron (-11.58%), Broadcom (-9.57%), Marvell Technology (-9.00%), Cadence Design (-7.13%), Intel (-6.72%) and Microsoft (-6.53%). Constellation Energy also came under pressure as nuclear power has been increasingly viewed as a way to power an increased buildout of datacenters across the country. Shares slumped by 13.66% for the week. Despite the slide, shares of Constellation Energy were the best performers in QQQ for the month, advancing by over 34%.

Trading Stats

For the month of January, shares traded of QQQ rose by 13.31% month-over-month along with notional value traded rising by 12.33% month-over-month. The month saw an average of 33.86 million shares trade each day (vs. 29.88 million last month) for a value of $17.54 billion (vs. $15.61 billion last month). That compares to averages of 65.70 million shares and $6.44 billion over the life of the fund, and 36.08 million shares and $16.89 billion for the past 12 months.