A New Light Shines? Superconductors

MONETARY

• At the July FOMC meeting, Federal Reserve participants vote to raise their target Federal Funds rate by 25bps from a target range of 500-525 to a new level of 525-550. This rate hike is largely seen as being the final rate hike in the current Rate Hike Cycle, although the Fed retains the right to continue make policy decisions as it deems prudent¹
  • Chairman Powell commented on the recent easing of inflationary pressures as it relates to aggregate headline inflation¹
    • (Powell) “First, it is a good thing that headline inflation has come down so much, because that’s really what the public experience is, and I would say that having headline inflation move down that much almost creates a, it will strengthen the broad sense that the public has that inflation is coming down, which will in turn, we hope, help inflation continue to move down.”¹
  • Additionally, Chairman Powell commented on the current strength of the Labor Market¹
    • (Powell) “The labor market remains very tight. Over the past three months, job gains averaged 244 thousand jobs per month, a pace below that seen earlier in the year but still a strong pace. The unemployment rate remains low, at 3.6 percent. There are some continuing signs that supply and demand in the labor market are coming into better balance. The labor force participation rate has moved up since last year, particularly for individuals aged 25 to 54 years.”¹
  • Chairman Powell also commented on the topic of what the Fed is seeing with regard to the interplay between the various economic factors and how those relationships may translate into monetary policy decisions looking forward¹
    • (Powell) “we want to see economic growth running at moderate or modest levels to help ease inflationary pressures, we want to see continued restoration of supply and demand balance, particularly in the labor market, and all of that should lead to declining inflationary pressures. What we see is we see those pieces of the puzzle coming together and we’re seeing evidence of those things now…”¹
    • (Powell) “So we intend, again, to keep policy restrictive until we’re confident that inflation is coming down sustainably to our 2 percent target, and we’re prepared to further tighten if that is appropriate”¹

FISCAL

• In response the recent Supreme Court ruling that blocked the Biden Administration’s attempt of mass student loan forgiveness, the Biden Administration unveils a new student loan relief program²
  • The new program, called the SAVE Program, will focus primarily on lower the monthly payments that borrowers must pay, in addition to providing various caveats that can lead to loan forgivenss²
    • For undergraduate loans, reduce the amount that borrowers must pay each month from 10% to 5% of discretionary income²
    • Raise the amount of income that is considered non-discretionary income which will be protected from repayment, making it so that no borrower earning under 225% of the federal poverty level will need to make payments²
    • Completely forgive loan balances after 10 years of payments, rather than 20 years, for borrowers with original loan balances of $12,000 or less²
    • Not charge borrowers with unpaid monthly interest²
  • The Biden Administration states, “All student borrowers in repayment will be eligible to enroll in the SAVE plan.”²

GEOPOLITICS

• China expresses concern over U.S. military aid package sent to Taiwan³
  • A spokesperson for China Defense Ministry stated:³
    • (Kefei) “The Taiwan issue concerns China’s core interests and is a red line that cannot be crossed in China-U.S. relations”³
  • The military aid package is worth up to $345M, however no formal proclamation of specific weapon systems to be provided was outlined³
  • Taiwan’s Defense Ministry expressed gratitude to the U.S. for its “firm security commitment,”³
    • The Taiwan Defense Ministry stated it will not comment on the package details due to the “tacit agreement”³

MISCELLANEOUS

• On July 22, 2023 a South Korean scientists published two scientific papers detailing how they created the world’s first ever seen superconductor material that is capable of achieving zero resistance conductivity at room temperature, a feat with potentially monumental implications for a technology. They named this new superconductor LK-99⁴
  • The announcement triggered a global race to reproduce the material to verify the South Korean scientists claims⁴
    • Scientists at Southeast University (Nanjing, China) have reported measuring zero electrical resistance, a major requirement for superconductivity, in a sample of LK-99 they independently produced⁴
      • However, the team working out of Southeast University was not able to produce superconductivity at room temperatures, which is what was outlined in the original research papers⁴
    • More research is needed to verify the South Korean scientists’ claims, however multiple teams over the globe have been able to at least replicate some of the valuable properties of superconductivity posited in the initial research⁴

 

[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. The Federal Reserve. “Transcript of Chair Powell’s Press Conference July 26, 2023”. July 26, 2023
2. The White House. “FACT SHEET: President Biden Announces New Actions to Provide Debt Relief and Support for Student Loan Borrowers”. June 30, 2023.
3. Reuters. “US announces Taiwan weapons package worth up to $345 million”. July 29, 2023
4. Tom’s Hardware. “Scramble to Validate Superconductor Breakthrough Confirms Zero Resistance, With a Catch”. August 2, 2023