Invesco QQQ monthly review

Overview

• For the month of December, QQQ saw an NAV total return of -0.69% and underperformed the S&P 500 Index which returned 0.06%. The Russell 1000 Growth Index returned -0.62% outperforming QQQ, while the Russell 1000 Value Index returned 0.68%, also outperforming QQQ.¹
• QQQ’s relative underperformance vs. the S&P 500 Index was driven by its 0% exposure to the Financials sector and overweight and differentiated holdings in the Consumer Discretionary sector.
• QQQ saw inflow of ~$7,769 million.
• QQQ ended the month with $407.69 billion in AUM and remained the 5th largest ETF in the US (based on AUM).
• For the month of December, shares traded of QQQ decreased by 25.13% month-over-month and notional value traded decreased by 23.80% month-over-month.²

Market Recap

In December, the “Santa Rally” failed to materialize for QQQ, as the fund declined for the second consecutive month, falling -0.69% on an NAV total return basis and underperforming the S&P 500 which returned 0.06%. Despite declines in consecutive months to close the year, 2025 proved to be another strong one for QQQ as the fund posted a NAV total return on the year of 20.77%, outperforming the S&P 500 which returned 17.86% on the year. In December, equity markets continued to broaden as equal weight, represented by the S&P 500 Equal Weight Index, increased 0.45% and outperformed the S&P 500.³ Additionally, value outperformed growth for the second consecutive month. The Russell 1000 Value increased 0.68% and outperformed the Russell 1000 Growth which decreased -0.62%.⁴ The S&P MidCap 400, representing mid caps, advanced 0.07%, while the Russell 2000, representing small caps declined -0.58%, both outperforming the S&P 500 and Nasdaq 100, which returned -0.67%.^5,6

December was another month of mixed results for equity markets with choppy performance amidst relatively muted volatility into the holiday season. The VIX Index, a measure of equity market volatility, ended the year at a level of 14.95, which was the lowest month end closing level of 2025.⁷ The VIX Index posted an intraday high of 18.33 on December 1^st before generally tailing off throughout most of the remainder of December with a brief pop mid-month as market participants showed a level of caution leading into the November CPI reports released on December 18^th.⁸

Equities began the month on a positive note despite mixed economic data creating a relatively cautious sentiment. On December 1^st, ISM Manufacturing Index, a widely watched economic indicator that measures the health of the manufacturing sector in the US, was released at 48.2.⁹ The headline print was weaker than expected and remained below 50, signaling continued contraction within the manufacturing sector. The softer than expected data was impacted by declining new orders and an increase in prices paid which was above Wall Street’s expectations. On December 3^rd, the ADP non-farm employment report indicated private payrolls declined by -32k, below estimates of a 10k increase.¹⁰ The miss in private payrolls signaled potential cooling within the labor market. However, the ISM Services PMI, a measure of US services activity, announced on December 3^rd that activity expanded at a slightly faster pace in November with a print of 52.6. The ISM Service PMI expanded at the fastest pace in nine months while prices paid dropped to their lowest level in seven months. On December 5^th the University of Michigan Consumer Sentiment Index was announced, with the index rising to 53.3, marking the first increase in the index in five months.¹¹ The announcement was supported by a more optimistic outlook for personal finances and improved consumer expectations on inflation.

Market activity was relatively subdued the second week of December as markets turned their attention to the Federal Reserve Open Market Committee’s (FOMC) meeting scheduled for December 9-10. On December 10^th, the FOMC announced a 25 basis point (bps) rate cut, bringing the target range to 3.50% - 3.75%.^12,13 The FOMC’s decision to cut rates by -25bps for the third consecutive meeting was well received by equities despite being widely anticipated. The updated projections signaled only one expected rate cut for 2026. The projections were initially interpreted as a more hawkish signal than expected, however, Federal Reserve Chairman Powell’s comments on a “gradually cooling” labor market and lower inflation risks signaling a less aggressive stance than was previously anticipated based on the 2026 projections. 

December 16^th brought the announcement of the Change in Nonfarm Payrolls and Unemployment Rate for November.¹⁴ The change in nonfarm payrolls was announced at 64k for November above a consensus estimate of 50k. However, in November the Unemployment Rate increased to 4.6%, slightly higher than Wall Street’s expectation of 4.5%.¹⁵

On December 18^th, the market turned its attention to the November Consumer Price Index (CPI) release. The announcement signaled positive developments on the inflation front with November CPI (YoY) announced at 2.7%, considerably lower than expectations of 3.1%. Additionally, the Core CPI (YoY), a measure that excludes more volatile items like food and energy, was announced at 2.6%, also significantly lower than estimates of 3.0%. Although still above the Fed’s 2% target, the November inflation results showed moderating inflation, which was well received by equities markets.

Equity market received some positive data towards the end of the year with the Q3 2025 GDP revisions that were announced on December 23^rd. The annualized US GDP growth rate for Q3 2025 was revised upwards from 3.8% to a rate of 4.3%, which exceeded expectations of 3.3% and marked the fastest growth rate of US GDP in the last 2 years.

QQQ Performance

From a sector perspective, four of the ten sectors represented in QQQ finished in positive territory for December. Basic Materials was the best performing sector, which advanced by 4.10%, followed by the industrials sector which returned 2.34%. QQQ’s relative underperformance versus the S&P 500 was driven by its 0% exposure to the Financials sector and its overweight and differentiated holdings in the Consumer Discretionary. The Financials sector is not held within QQQ compared to the 10.55% average weighting within the S&P 500 with a total return of 3.69%. The Consumer Discretionary sector averaged a 17.65% weighting within QQQ and saw total return of -1.44% compared to a 14.04% average weighting in the S&P 500 for December with a total return of 0%.

Standardized performance - Performance data quoted represents past performance. Past performance is not a guarantee of future results; current performance may be higher or lower than performance quoted. Investment returns and principal value will fluctuate and Shares, when redeemed, may be worth more or less than their original cost. See invesco.com to find the most recent month-end performance numbers. Market returns are based on the midpoint of the bid/ask spread at 4 p.m. ET and do not represent the returns an investor would receive if shares were traded at other times. Fund performance reflects applicable fee waivers, absent which, performance data quoted would have been lower. Returns less than one year are cumulative. Invesco QQQ’s total expense ratio is 0.18%.

The Industrials and Technology sectors also contributed to QQQ relative underperformance vs. the S&P 500. The Industrials sector averaged a 3.45% weighting in QQQ and saw total return of 2.34% compared to an 11.03% average weighting in the S&P 500 and total return of 3.34%. The Technology sector averaged a 64.56% average weighting in QQQ and saw total return of -0.14% compared to a 41.39% average weighting in the S&P 500 for December with a total return of -0.18%.

Warner Bros Discovery Inc. received notable attention in the headlines this month regarding a potential sale that could stand to significantly reshape industry and is expected to raise antitrust concerns regardless of the winner. On December 5^th, Warner Bros. Discovery announced a definitive agreement with Netflix to sell its film & TV studios and streaming assets to Netflix for a price of $27.75 per share. The initial agreement announced with Netflix valued the deal at an enterprise value of $82.7 billion with an equity value of $72 billion. The agreement included the sale of Warner Bros. Pictures, HBO, HBO MAX, DC Studios as well as the company’s library. The agreement also stipulates that Warner Bros would spin off its Global Linear Networks which include CNN, Discovery and TNT.

The initial agreement with Warner Bros included significant penalties should a deal fail to be finalized. Netflix committed to a breakup fee of $5.8 billion or 8% of the deals equity value should the deal fall apart or fail to win regulatory approval. The stated fee is one of the largest break up fees of all time and well above average compared to other deals of significant value. The magnitude of the agreed upon fee signaled Netflix’s confidence in receiving regulatory approval. The terms also stipulated that Warner Bros. is subject to a $2.8 billion reverse breakup fee if its shareholders vote down the deal, and should Warner Bros accept a rival offer, the new buyer would be subject to the fee.

On December 8^th, Paramount Skydance launched a hostile takeover bid, submitting a $30 per share all-cash takeover for all of WBD, carrying a total value of $108.4 billion, including debt. Paramount Chief Executive, David Ellison, son of Oracle’s Larry Ellison leveraged his family’s good relationship with President Donald Trump. Affinity Partners, which is affiliate with Jared Kushner, son-in-law of President Trump, participated in the deal initially committing $200 million before ultimately stepping away from the deal on December 16^th. Warner Bros Board ultimately rejected the Paramount bid on December 17^th which was referred to as weak and risky. 

On December 22^nd, Paramount submitted a revised bid, gaining a $40 billion personal guarantee from Larry Ellison and matching Netflix’s $5.8 billion break up fee. Netflix also restructured its $59 billion bridge loan in connection with the deal. Warner Bros Board has consistently affirmed support of the Netflix deal over the Paramount offer.

Developments continued in artificial intelligence (AI) as competitor chip technology seeks to challenge the dominance of Nvidia’s GPU chip as the chip of choice in powering AI model inference. Amazon made headlines releasing its latest artificial intelligence chip, named Trainium3. Amazon is the latest company to renew efforts to challenge Nvidia’s dominance over the AI chips market. Amazon has made the claim that the Trainium3 is capable of powering intensive calculations that drive AI models in a less costly and more efficient manner than Nvidia’s GPU chips. Amazon’s news is the latest hyperscaler push in the AI accelerator chip market. This news follows the official public release of the Google Tensor Processing Unit (TPU) chip in November 2025, which is an accelerator chip specifically designed and optimized for high volume, low latency AI inference and model service to meet the demands of interactive, real-time applications central to artificial intelligence models. AI and large language models.¹⁶

Trading Stats

For the month of December, shares traded of QQQ decreased by 25.13% month-over-month along with notional value traded decreased by 23.80% month-over-month based on NAV. The month saw an average of 48.38 million shares trade each day (vs. 64.62 million last month) for a value of $29.90 billion (vs. $39.24 billion last month). That compares to averages of 65.15 million shares and $7.17 billion over the life of the fund, and 48.67 million shares and $26.74 billion for past 12 months.