Invesco QQQ monthly review (2024)

Overview

• For the month of February, QQQ’s NAV returned 5.39% outperforming the S&P 500 Index which returned 5.34%. The Russell 1000 Growth Index outperformed QQQ which returned 6.82% while the Russell 1000 Value Index underperformed which returned 3.69%.
• QQQ’s outperformance vs. the S&P 500 was driven by its overweight exposure and differentiated holdings in the Technology sector. The ETF’s underweight exposure and differentiated holdings in the Utilities sector also contributed to relative performance.
• QQQ saw inflow of $169.31 million.
• QQQ ended the month with $254.69 billion in assets under management (AUM) and remained the 5th largest ETF in the US (based on AUM).
• For the month of February, shares traded of QQQ fell by 6.52% month-over-month along with notional value traded falling by 2.24% month-over-month.¹

Market Recap

Equities continued their move up despite the continued hawkish messaging from Federal Open Market Committee (FOMC) officials, higher than expected inflation and rising interest rates.²Out of the eight full weeks of trading seen this year as of the end of February, six have been positive for both QQQ’s NAV and the S&P 500 Index. Moreover, both have not seen negative monthly performance since October 2023, four consecutive months. Small-cap equities also performed well during the month with the Russell 2000 up 5.65%.

Total return from 12/29/2023 – 2/23/2024 for QQQ and the S&P 500 Index were 6.70% and 6.91%, respectively. All weekly returns were positive with exception to the weeks ending on 1/5/2024 and 2/16/2024. QQQ return for these weeks were -3.07% and -1.51%. S&P 500 returns for these weeks were -1.50% and -0.35%. Source: Bloomberg L.P., as of 2/29/2024.

With no FOMC meeting in February, many investors turned their attention to economic readings that may impact future monetary policy decisions, movement in interest rates and earnings announcements. After the hawkish language from Federal Reserve (Fed) Chairman Jerome Powell at the end of January, close attention was given to inflation-related readings. January’s year-over-year and month-over-month Consumer Price Index (CPI) readings were announced on the 13th and both came in higher than expected.³The year-over-year reading was 3.1%, higher than the expected 2.9% but lower than the previous reading of 3.4%. The new reading saw the biggest contribution from a rise in the cost of Core Services, which was larger than the previous reading, and the cost of Food. The costs of Energy, and Core Goods fell. The month-over-month reading came in at 0.4%, higher than the 0.3% expectation and the 0.3% prior reading. Increases in the costs of Core Services and Food contributed to the rise while the cost of Energy and Core Goods fell. The S&P 500 fell over 1.35% on the day of the announcement, its second worst daily return year-to-date.

The Fed’s preferred measure of inflation, Personal Consumption Expenditures (PCE), was reported on the last day of the month and both the year-over-year and month-over-month readings were in line with analysts’ expectations.⁴The year-over-year reading came in at 2.4%. Similar to CPI, rising costs in Services continued to persist and were not only the largest contributor to the reading but also higher than the previous reading. Rising costs within Nonprofits and Nondurable Goods also contributed to the increase. The cost of Durable Goods fell, a trend seen since last June, and was the only component to fall.

Month-over-month PCE was announced at 0.3%, in line with analysts’ estimates but higher than the previous reading of 0.2%.

The month-over-month increase in the Cost of Services rose at a rate not seen since June 2022 and was the majority of the monthly increase. An increase in the cost of Durable Goods and Nonprofits also rose while the cost of Nondurable Goods fell. Equities reacted positively to the announcement with the S&P 500 finishing near all-time highs.

As interest rates rose during February, many investors adjusted to the idea of rate cuts arriving later than initially expected. After testing the recent lows, the 10yr Treasury’s yield rose from 3.88% to close the month at 4.25%.⁵The yield rose as high as 4.35% at one point. This increase in interest rates affected other interest-rate sensitive instruments as the average 30yr fixed rate mortgage in the US rose from 6.96% at the end of January to 7.31%. 2023 brought a year of falling interest rates as equities rose, a relationship that has traditionally been opposite. February potentially signaled a shift back to the historical norm of positive correlation between yields and equity returns.

The first revision of 2024 ‘s fourth quarter Gross Domestic Product (GDP) reading arrived towards the end of the month and was revised downward from the initial reading.⁶The revision showed the US economy expanded at an annualized rate of 3.2%, down from 3.3%. The reading showed expansion in consumer spending, exports, fixed investments and government expenditures while private inventories contracted. The 3.2% revision remained below the 2023 third quarter reading of 4.9%.

Coinciding with the CPI release on the 13^th, volatility spiked to levels last seen in November. The VIX Index, a commonly used gauge of equity volatility, rose as high as 18.00 before closing the day at 15.85.⁷The move higher ultimately proved to be short lived as equities rose towards the end of the month, fueled by positive earnings announcements. The VIX finished February at 13.40, lower than where it closed in January at 14.35.

QQQ Performance

From a sector perspective, Energy, Utilities and Consumer Discretionary were the best performing sectors in QQQ and returned 11.51%, 10.91% and 7.38%, respectively. During the month, these three sectors had average weights of 0.45%, 1.15% and 18.55%, respectively. The bottom performing sectors in QQQ were Telecommunications, Health Care and Consumer Staples with average weights of 4.57%, 6.47% and 3.99%, respectively. Telecommunications returned -4.81%, Health Care returned -2.83% while Consumer Staples returned -1.29%.

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 outperformance vs. the S&P 500 was driven by its overweight exposure and differentiated holdings in the Technology sector. The ETF’s underweight exposure and differentiated holdings in the Utilities sector also contributed to relative performance. Lack of exposure to the Financials sector was the third contributor to relative performance vs. the S&P 500. The Health Care sector detracted the most from relative performance and was driven by its differentiated holdings. Overweight exposure and differentiated holdings in the Telecommunications sector, along with its underweight exposure and differentiated holdings in the Industrials sector also detracted from relative performance to the S&P 500.

QQQ’s overweight exposure to Meta Platforms Inc., Nvidia Corp. and Broadcom Inc. were the largest contributors to relative performance vs. the S&P 500. Meta Platforms Inc., Nvidia Corp. and Broadcom Inc. had average weights during the month of 4.81%, 5.18% and 4.43%, and returned 25.76%, 28.58% and 10.21%, respectively. Overweight exposure to Adobe Inc., Amgen Inc. and Apple Inc. detracted the most from relative performance vs. the S&P 500 for the month and had average weights of 2.02%, 1.19% and 8.41%, respectively. Adobe, Amgen and Apple returned -9.31%, -12.19% and -1.85%, respectively.

The much-anticipated earnings announcement from semiconductor company Nvidia finally arrived on the 21^st and did not disappoint bullish investors. Nvidia beat analysts’ expectations on both the top and bottom lines along with issuing favorable guidance for the next quarter. Revenue came in at $22.1 billion which was above the $20.4 billion estimate. The closely watched Data Center division, which contains the revenue related to artificial intelligence (AI), beat expectations by over $1.2 billion and was reported at $18.4 billion. Year-over-year total revenue growth stood at an astounding 265% with Data Center revenue growth at 409%. The semiconductor company saw revenue growth across all major revenue centers including Gaming, Professional Visualization and Automotive. Adjusted earnings-per-share came in at $5.16, 12% higher than the $4.60 expected by analysts.⁸The company also continued to focus on innovation which was shown through its $2.5 billion research and development expense. Guidance issued for next quarter also impressed as the company stated it anticipates revenue to come in at $24 billion, +/- 2%. Nvidia’s stock rose in afterhours trading and finished the following day up over 16%. The company’s market capitalization finished the month just shy of $2 trillion at $1.98 trillion and has now doubled in only a span of eight months.

Meta Platforms announced earnings on the first day of the month and surprised to the upside on both revenue and earnings. Adjusted earnings-per share were announced at $5.33 vs. the estimate of $4.91 while revenue came in at $40.1 billion vs. the estimate of $39.0 billion. Advertisem*nt revenue accounted for over $38 billion of all revenue recognized by the social media company. Higher-than-expected daily and monthly active users was also viewed positively by investors, as these metrics showed over two billion daily and over three billion monthly users. A $50 billion addition to share buybacks also contributed to strong performance of the company’s stock. What came as the biggest surprise to investors was the announcement of the first ever dividend to be paid in March. A dividend of $0.50 per share may point to the continued maturation of the company. Meta’s stock rose over 20% the following trading session.

Being one of the largest companies in the world, Apple’s earnings always garner much attention and were announced on the 1^st of the month. Revenue beat consensus estimated and came in at $119.6 billion vs. $117.9 billion. Adjusted earnings-per-share also beat expectations at $2.19 vs. the $2.11 estimate. Although both metrics beat, shares traded down as revenue generated in the Great China region missed analysts’ estimates by 11%. The company did see revenue from services rise by 11.3% on a year-over-year basis and the company stated they expect this number to continue to grow. The company’s stock fell the next day and underperformed the broader market which was up on the day. The recent decline in Apple’s stock, down 6.0% year-to-date, has caused the company to fall from being the largest company, by market capitalization, in the world to being the second, with Microsoft taking the top spot.

Trading Stats

For the month of February, shares traded of QQQ fell by 6.52% month-over-month along with notional value traded falling by 2.24% month-over-month. The month saw an average of 43.32 million shares trade each day (vs. 46.34 million last month) for a value of $18.71 billion (vs. $19.13 billion last month). That compares to averages of 66.82 million shares and $6.06 billion over the life of the fund, and 51.12 million shares and $18.54 billion for past 12 months.

• 1

  Notional value is a term used to value the underlying asset—total value of a position, how much value a position controls, or an agreed-upon amount in a contract—in a derivatives trade.

• 2

  The Federal Open Market Committee (FOMC) is a 12-member committee of the Federal Reserve Board that meets regularly to set monetary policy, including the interest rates that are charged to banks.

• 3

  The Consumer Price Index (CPI) measures the average change in prices over time that consumers pay for goods and services.

• 4

  The Personal Consumption Expenditures Price Index is a measure of the prices that people living in the United States, or those buying on their behalf, pay for goods and services.

• 5

  The 10-year Treasury yield is the annualized rate of return you would earn on a 10-year Treasury note issued by the U.S. government if you held the note to maturity.

• 6

  GDP measures the monetary value of final goods and services produced in a country in a given period of time.

• 7

  The CBOE Volatility Index, or VIX, is a real-time market index representing the market's expectations for volatility over the coming 30 days.

• 8

  Earnings per share is the monetary value of earnings per outstanding share of common stock for a company.