Market outlook

QQQ quarterly outlook report

Senior Factor & Core Equity Strategist Ryan McCormack gives the quarterly highlights and outlook for Invesco QQQ ETF
Performance Takeaways

Invesco QQQ fell on a NAV total return basis by 2.91% and outperformed the S&P 500 Index as equities came under pressure during Q3.


QQQ’s overweight allocations and outperformance within the Consumer Discretionary and Technology sectors were the biggest drivers of relative outperformance versus the S&P 500 Index.

QQQ Performance

Invesco QQQ ETF (QQQ) declined by 2.91% for Q3 (as of 09/30/2023) but outperformed the S&P 500’s total return of -3.27%. For the year as of 09/30/2023, QQQ’s total return of 35.13% has outperformed the S&P 500 Index’s total return of 13.06% by just over 22 percentage points. Attention remained firmly on the Federal Reserve (Fed) with investors grappling with the timing and number of potential rate hikes the Federal Open Market Committee (FOMC) will undertake.1  With some price gauges showing a year-over-year acceleration over the summer months, questions arose about how long the Fed will keep rates at levels not seen in the past 20-years.

QQQ’s overweight exposure and outperformance within the Consumer Discretionary, Telecommunications and Technology sectors (per Industry Classification Benchmark- ICB) were the largest contributors to relative performance against the S&P 500 Index.2  Consumer Discretionary averaged an 18.96% weighting in QQQ (vs. a 14.15% weighting in the S&P 500 Index) and declined by 2.89% (vs. -5.57% in the S&P 500). Telecommunications averaged a 5.04% weighting in QQQ (vs. 2.34& in the S&P 500) and gained 5.78% (vs. 1.13% for the S&P 500) for the quarter. The Technology sector averaged a 58.19% weighting in QQQ (vs. 31.70% in the S&P 500) and declined by 3.01% in QQQ, outperforming the 3.62% decline in the S&P 500. Within QQQ and the S&P 500, only two sectors showed positive performance for Q3; the aforementioned Telecommunications sector and the Energy sector, which advanced by 2.38% in QQQ (vs. 10.73% in the S&P 500). The energy sector was the largest detractor to relative performance vs. the S&P 500 as the sector only averaged a 0.65% weight in QQQ (vs. 4.51% in the S&P 500) and underperformed its counterpart by 8.35%.

Year to date, the Technology and Consumer Discretionary sectors have been the largest contributors to relative performance with average weights of 58.42 and 19.02%, respectively (vs. 29.48% and 13.90%, respectively in the S&P 500) and total return of 49.36% and 40.68%, respectively (vs. 44.47% and 20.91% respectively in the S&P 500).

The two best performing stocks in QQQ year to date, and two largest contributors to relative outperformance vs. the S&P 500 are NVIDIA and Meta Platforms. NVIDIA is higher by 197.76% for the year, while Meta Platforms is higher by 149.47% Over the course of Q3 performance slowed with NVIDIA advancing by 2.84% and Meta moved higher by 4.61%. There was an abundance of attention on NVIDIA’s Q2 earnings report on August 23, particularly after NVDA’s Q1 earnings report on May 24 where the company issued a significant update to its Q2 sales guidance. NVDA revised its Q2 revenue forecast to ~$11 billion, roughly 53% higher than the average analyst forecast of ~$7.2 billion. The Q2 report surpassed even those estimates, with revenue of $13.51 billion, representing a ~23% upside surprise to guidance, and 102% year-over year growth from last year’s revenue of 6.7 billion in the same period. Adjusted earnings per share (EPS) of $2.70 per share was a 30.31% upside surprise to analyst expectations and represented a 429% year-over-year increase from the same period one-year earlier.3  The company pointed to strong results from its data center business, with revenue at $10.32 billion as demand for chips used to power Artificial Intelligence (AI) applications grew considerably. NVIDIA provided Q3 revenue guidance of roughly $16 billion better than analysts’ expectations for ~$12.6 billion. The company also authorized a $25 billion share repurchase program. In the session immediately following the earnings announcement, shares traded higher by 0.10%. Meta platforms reported its Q2 earnings report on July 26 that also beat analysts’ expectations. Revenue of ~$32 billion was a 3% upside surprise to estimates of $31.06 billion and EPS of $2.98 was 2% better than analysts’ forecasts. Revenue growth of ~11% on a year-over-year basis is the first period in which the company has seen greater than 10% growth since Q4 2021. Meta CEO Mark Zuckerburg’s “year of efficiency” continues, as the company cut costs and noted that while expenses in the quarter were up on a year over year basis, capital expenditures for the year will be lower than initially forecast. Advertising revenue also continued to rebound with 12% year over year growth and Zuckerburg touted Meta’s growing AI initiatives. The company also provided Q3 revenue guidance of $32 billion - $34.5 billion, better than analysts’ expectations for $31.3 billion and would represent over 15% growth on a year-over-year basis.

Source: Bloomberg L.P., as of 09/30/2023. 
Note: All periods represent calendar years. Click for standardized performancePerformance data quoted represents past performance, which 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 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. An investor cannot invest directly in an index. Index returns do not represent Fund returns.

Single Stock Performance

The best-performing stocks in QQQ for Q3 were PDD Holdings Inc (+41.84%), Amgen Inc (+22.03%) and Atlassian Corp (+20.08). The worst performers for the quarter were Enphase Energy Inc. (-28.26%), Dexcom Inc (-27.40%) and Illumina Inc (-26.78%).

Market Drivers During Q3

Q3 performance seemed to pivot away from AI optimism to uncertainty on future Fed action to combat price pressures. Signals in the economy remain mixed with an improvement on prices, albeit at a slow rate, while still above the Fed’s long-term target of 2%.

During the quarter, the Federal Open Market Committee (FOMC) met twice, in July and September. During the July meeting the committee raised its benchmark rate by 25 basis points to 5.25 – 5.50%, the highest level in 22 years.4  This followed the June meeting “Fed pause” that left rates unchanged for the first time since March 2022, or 10 consecutive meetings. At this meeting, Chairman Jerome Powell noted that participants no longer forecast a recession in the second half of the year, which had markets wondering if a soft landing was a possibility and whether this would push a potential rate cut further down the line. Powell continued to reiterate that the Fed will remain data dependent when it comes to assessing further monetary policy decisions and noted that in September both a pause and rate hike were both on the table. As September rolled around, it turned out to be the latter, as the Fed kept its target rate unchanged at 5.25% - 5.50%. However, September also brought the release of the Fed’s dot plot which shows estimates for where rates may end up according to policymakers. According to the most recent release, participants still anticipate one more rate hike before year-end.

On the inflation front, data was mixed throughout the quarter. The June Consumer Price Index (CPI) was released in early July at a 3.0% year-over-year growth rate, showing some moderation of year-over-year prices from the May reading at 4.0%.5  From there July CPI showed a year-over-year acceleration to 3.2% and August accelerated even faster at 3.7%. On a month-over-month basis, CPI showed a similar trend with prices advancing 0.2% month-over-month in June and July and 0.7% month-over-month in August, Energy prices likely put upward pressure on the readings as oil prices rose by over 28.5% as measured by crude oil futures during the quarter and were over 14% higher from one year earlier. Oil prices climbed throughout the quarter on tight supply and was further fueled by the announcement that Saudi Arabia and Russia would continue their 1.3 million barrel per day voluntary production cut through the end of the year. Stripping out the more volatile food and energy components, the Core CPI reading showed year-over-year moderation in Q3 with June at 4.8%, an easing from the May 5.3% reading: July at 4.7% and August at 4.3%. The core reading has been a bit stickier throughout the spring and summer and is not entirely immune from rising energy prices as airfare jumped by 5% in August as energy prices soared.

CPI (year-over-year) and Core CPI (year-over-year) 08/31/2020 - 8/31/2023

Source: Bloomberg L.P., as of 09/30/2023

The Fed has also kept a very close eye on the employment picture, as Chairman Powell has highlighted the upward pressure that a tight labor market can exert on prices. For months, the Fed has cautioned about a potential softening of the labor market due in part to the lagged effect of tighter monetary policy, although that softening has yet to be meaningfully seen. The unemployment rate moderated between 3.5% and 3.8% during Q3 which sits near the historical low of the last 50 years. Jobless claims did not suggest labor softening either, as the average weekly initial jobless claims for Q3 was 226K, lower than the 229K average for 2023. The quarter and year-to-date averages sit firmly below 300K, the level that is the dividing line between a strengthening and weakening job market.


With a challenging Q3 behind the market, any action and/or commentary from the Fed is likely to be dissected as market participants try to glean any information around future rate hikes, pauses or even cuts. The FOMC will meet twice in Q4, on October 31-November 1 and December 12-13. Expect elevated market activity around these dates, as we have seen in the days surrounding Fed meetings throughout the year. While FOMC policymakers expect another rate hike for the year, market participants have yet to be convinced. At the time of writing, Fed Fund Futures are pricing in a ~38% chance of another hike in 2023 with the first rate cut not expected until the late spring.6  We will watch for continued progress on prices and any signs of labor market weakness as potential indicators that the Fed may amend its policy stance.

Later this month QQQ companies will begin to release calendar Q3 earnings reports. NVIDIA’s earnings announcement (preliminarily scheduled for November 21) will likely be followed very closely. After a blockbuster calendar Q2 earnings report, investors will watch to see if the company can exceed its $16 billion revenue forecast which would represent 18% quarter-over-quarter growth and ~170% year over year growth. The report will likely give greater insight on the landscape of processor demand to power AI applications, and how quickly AI may begin to permeate various industries. Tesla is the first of the QQQ heavyweight companies to report, preliminarily scheduled for October 18. Investors will likely take note of how each of these mega-cap leaders is faring amid this muddled economic backdrop and will likely be on the lookout for any mention of how each company is building its AI capabilities and where utilization may occur in the marketplace.

About Risk

There are risks involved with investing in ETFs, including possible loss of money. Shares are not actively managed and are subject to risks similar to those of stocks, including those regarding short selling and margin maintenance requirements. Ordinary brokerage commissions apply. The Fund’s return may not match the return of the Underlying Index. The Fund is subject to certain other risks. Please see the current prospectus for more information regarding the risk associated with an investment in the Fund.

Investments focused in a particular sector, such as technology, are subject to greater risk, and are more greatly impacted by market volatility, than more diversified investments.


  • 1

    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.

  • 2

    The Industry Classification Benchmark (ICB) is a system for assigning all public companies to appropriate subsectors of specific industries.

  • 3

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

  • 4

    A basis point is one hundredth of a percentage point.

  • 5

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

  • 6

    Fed fund futures are derivatives based on the federal funds rate, the U.S. overnight interbank lending rate on reserves deposited with the Fed.

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