Let’s Get Quantum

MONETARY

• In the most recent release of FOMC Meeting Minutes Federal Reserve staff and participants made note of a number of important economic developments with regards to economic growth, employment, and inflation¹
  • Regarding employment, projections were relatively steady and noted that some degree of unemployment reduction was still estimated for 2024. Additionally, there were reports of continued easing of labor supply issues¹
    • (FOMC) “Many participants noted that, during the past year, labor supply had been boosted by increased labor force participation rates as well as by immigration. Participants further commented that recent estimates of greater immigration in the past few years and an overall increase in labor supply could help explain the strength in employment gains even as the unemployment rate had remained roughly flat and wage pressures had eased.”¹
  • On the topic of economic growth, FOMC participants noted that growth remained positive at a solid pace; however, did note that an acceleration of economic growth from this point was not estimated to be likely¹
    • (FOMC) “Participants noted that recent indicators suggested that economic activity had continued to expand at a solid pace. Real GDP growth in the first quarter had moderated relative to the second half of last year, but PDFP growth maintained a strong pace.”^1”
    • (FOMC) “Although recent PDFP data suggested continued strong economic momentum, participants generally did not interpret the data as indicating a further acceleration of activity and expected that GDP growth would slow from last year’s strong pace.”
    • (FOMC) “In their discussion of the outlook for the household sector, participants observed that consumer spending remained firm in the first quarter, supported by low unemployment and solid income growth.”¹
  • Participants also noted many developments and perspectives on the current state of the Fed’s goal to bring inflation sustainably back down to normalized levels¹
    • (FOMC) “Participants observed that while inflation had eased over the past year, in recent months there had been a lack of further progress toward the Committee’s 2 percent objective”¹
    • (FOMC) “A few participants remarked that unusually large seasonal patterns could have contributed to January’s large increase in PCE inflation, and several participants noted that some components that typically display volatile price changes had boosted recent readings”¹
    • (FOMC) “Participants discussed several factors that, in conjunction with appropriately restrictive monetary policy, could support the return of inflation to the Committee’s goal over time.”¹
      • (FOMC) “One was a further reduction in housing services price inflation as lower readings for rent growth on new leases continued to pass through to this category of inflation.”¹
      • (FOMC) “Several participants stated that core nonhousing services price inflation could resume its decline as wage growth slows further with labor demand and supply moving into better balance, aided by higher labor force participation and strong immigration flows.”¹
      • (FOMC) “In addition, many participants commented that ongoing increases in productivity growth would support disinflation if sustained, though the outlook for productivity growth was regarded as uncertain”

GEOPOLITICS

• In a strategic move to bolster non-US trade relations, Chinese Premier Li Qiang attends a trilateral summit with leaders from Japan and South Korea in an attempt to improve economic relations and foster trade²
  • This was the first meeting between Japan and South Korea since December 2019²
  • There was no concrete breakthroughs at the meeting and the three leaders pledged to hold regular trilateral meetings and to cooperate on trade and clean-energy efforts. Tourism and educational exchanges between countries were trilaterally encouraged to continue²
  • Moving forward, analysts see material improvements in these relationships as unlikely due to a myriad of issues
    • (Tongfi Kim) “The allies’ dependence on U.S. military protection will limit their autonomy in the economic sphere, but Washington cannot expect the allies to comply with its demands blindly,”²
    • (Patricia M. Kim) “No one has any illusions that the lines of alignment in northeast Asia will be redrawn through this summit or anytime soon,”²
    • (Jeremy Chan) “China hopes to use the trilateral summit to prevent two of its erstwhile regional partners from drifting too far into Washington’s orbit,”²

MISCELLANEOUS

• Nvidia announced it will accelerate quantum computing efforts at national supercomputing centers around the world with the open-source Nvidia CUDA-Q platform³
  • Supercomputing sites in Japan, Poland and Germany will use the software to run the quantum processing units (QPUs) inside their high-performance supercomputing systems³
  • By combining both quantum computers with traditional supercomputing capabilities, researchers will likely be able to make tremendous progress in the field of quantum computing and possibly allow for more practical uses of the technology³
  • (Tim Costa – Nvidia) “Nvidia’s quantum computing platform equips pioneers such as AIST, JSC and PSNC to push the boundaries of scientific discovery and advance the state of the art in quantum-integrated supercomputing.”³
  • (Krzysztof Kurowski) “The open, easy integration and programming of multiple QPUs and GPUs efficiently managed by user-centric services is critical for developers and users. This close collaboration paves the way for a new generation of quantum-accelerated supercomputers for many innovative application areas, not tomorrow, but today.”³

 

[See Below for Disclosures & Annotations]

DISCLOSURES

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

The companies presented here are for illustrative purposes only and are not to be viewed as an investment recommendation.

Tax laws and regulations are complex and subject to change, which can materially impact investment results. LPL Financial does not provide tax advice. Clients should consult with their personal tax advisors regarding the tax consequences of investing.

 

ANNOTATIONS

1. Federal Reserve. “Minutes of the Federal Open Market Committee”. May 22, 2024
2. Reuters. “South Korea, China, Japan joint declaration after first summit in four years”. May 27, 2024.
3. Venture Beat. “Nvidia launches quantum computer centers with CUDA-Q platform”. May 12, 2024