Why the Invesco QQQ Trust Gained 11% in November

It’s rare for an exchange-traded fund (ETF) to move by double digits in a single month, but that’s exactly what happened with the Invesco QQQ Trust (QQQ 0.25%) in November. The ETF tracks the Nasdaq 100 index, which is made up of the 100 largest non-financial Nasdaq stocks, and rode a rising wave in the tech sector. Much of the ETF is made up of the “Magnificent Seven” stocks: Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta Platforms, and Tesla.

For November, the Invesco QQQ Trust finished up 11%, according to data from S&P Global Market Intelligence. As you can see from the chart below, the ETF modestly outpaced the S&P 500.

QQQ data by YCharts

A few stocks moved the needle

The QQQ ETF has a long track record of outperforming the S&P 500 and that edge was on display once again last month. As an ETF holding many stocks, there’s no single reason that the QQQ trust soared last month, but macroeconomic news was a key factor. The ETF soared early in the month on encouraging employment data and strong earnings reports. It jumped again on Nov. 14 after the October inflation report was cooler than expected, a sign that interest rate hikes could be over. By the end of the month, some surveys showed that most investors now expect the Fed to start lowering rates in the first half of next year, which also helped give stocks a boost.

Among the top performers in the ETF last month were Datadog, Enphase Energy, and PDD Holdings, the parent of Pinduoduo and Temu. However, most of the growth was driven by the big tech companies, as roughly 42% of the fund’s value comes from the Magnificent Seven stocks, which were mostly up strongly last month.

What’s next for the QQQ?

This ETF should continue to trend with the broader macroeconomic environment as it’s too diverse to be moved by singular, company-specific events.

Since the QQQ ETF is weighted toward growth stocks, it’s more likely to be sensitive to interest rates than the broad market, so falling interest rates or signs that interest rates are done rising should help move the ETF higher. Still, there’s plenty of uncertainty in the market heading into 2024, and many of the big tech stocks in the QQQ are trading at a pricey valuation.

However, with investors still excited about the potential of artificial intelligence, the ETF looks like a good bet to continue to outperform the S&P 500.