Balchunas, McCormack on What Makes QQQ a Powerhouse

The Invesco QQQ Trust (QQQ) is on a roll. Up 47% this year, the Qs, as the fund is colloquially called, is massively outperforming the 20% gain for the S&P 500. Made up of America’s largest and innovative companies, it seems like nothing can stop the ascent of this $220 billion ETF.

In this episode of Exchange Traded Fridays, Ryan McCormack, senior factor and core equity ETF strategist at Invesco, and Bloomberg senior analyst Eric Balchunas, sit down with etf.com senior analyst Sumit Roy and etf.com wealth management editor Jeff Benjamin to discuss the history of QQQ and its unusual nonprofit structure.

As a fund that holds the 100 largest non-financial companies listed on the Nasdaq exchange, most of the companies in the S&P 500 aren’t in QQQ. But according to Balchunas, that hasn’t mattered because the most important companies in the U.S. are in the ETF.

“With the Qs, you get…America’s crème de la crème of innovative companies: Tesla, Nvidia, Amazon, Meta, Netflix. Some of these companies are now in the communication sector, [not the technology sector],” Balchunas noted, which is an advantage of the ETF versus, say, a pure tech ETF like the Technology Select Sector SPDR Fund (XLK).

“The Qs capture that innovative, techy-but not-strictly-tech spirit that you get in the United States. That’s why the Qs will get more flows over time than a strict tech ETF that was defined by the GICS sector people.”

Eric Balchunas is a senior ETF analyst at Bloomberg, where he has more than a decade of experience working with ETF data, designing new functions and writing ETF research for the Bloomberg terminal. He also writes articles, feature stories and blog posts on ETFs for Bloomberg.com and appears each week on Bloomberg TV and Radio to discuss ETFs.