Semiconductor Context: Why 7nm Chips Matter
“7nm” chips refer to semiconductors manufactured using a 7-nanometer process, meaning the smallest features on the chip are approximately 7 nanometers wide. For comparison:
- Older nodes: 28nm, 14nm, 10nm
- Advantage of smaller nodes: More transistors can fit on the same chip, leading to:
- Higher computing power
- Lower energy use
- Faster switching speeds
These improvements are critical for sectors like artificial intelligence, gaming, mobile devices, and data centers.
Current industry trajectory: Taiwan Semiconductor Manufacturing Company (TSMC) plans to begin producing 2nm chips later this year.
Despite recent news out of China related to chip development or regulations, the potential impact on major players like Nvidia (NVDA), ASML, and TSMC appears limited. Market concerns may be overstated in this case.
Focus Returns to the Fed
Attention shifts to Jerome Powell and today’s Federal Open Market Committee (FOMC) decision. The market widely expects a 25 basis point (bps) rate cut, beginning what could be a longer easing cycle.
Projected path:
- Estimated total of 100 bps in cuts through January 2026
- Some speculation about a larger 50 bps cut today, but that is seen as unlikely
Signals to watch:
- Typically, if the Fed were planning a surprise move, they would signal it through trusted media channels (e.g. Nick Timiraos at WSJ or analysts at Goldman Sachs).
- Nick’s article today suggests a 25 bps cut remains the base case.
Fed Mandates Under Discussion
Traditionally, the Fed has two mandates:
- Maximum employment
- Price stability
However, interim Fed Governor Steven Miran is suggesting a third mandate:
3. Moderate long-term interest rates
While this goal has long been implied, Miran wants to formalize it. Critics argue this could politicize the Fed and undermine its independence.
Note: Miran is serving temporarily — his appointment ends in January. Future changes could depend on political developments.
Market Sensitivity: What a 50 bps Cut Could Signal
Markets might interpret a 50 bps cut as:
- A sign of panic, not confidence
- A shift that could trigger algorithmic selling
Thus, Powell must strike a careful tone:
- Too dovish → implies fear
- Too hawkish → contradicts current expectations
- Ideal tone: Balanced and methodical
Other Factors to Watch
1. Dot Plot
- The Fed’s interest rate forecast (“dot plot”) will be scrutinized. A clear, consistent outlook is better than scattered opinions.
2. Dissenters
- In July, there were two FOMC members who disagreed with the decision. Today’s count could indicate internal unity or division.
Economic Data Overview
- Advance Retail Sales: Strong, beating expectations → suggests consumers remain resilient, complicating calls for aggressive cuts
- Mortgage Applications: Up 29.7%, with 30-year conforming rates now around 6.25% (down from 7% two months ago)
- Housing Starts: Expected to fall by 4.4%
- Building Permits: Expected to rise by 0.6%
Bond Market Insight
- 10-Year Yield: Hovering at 4.00%
- If it breaks below this level decisively, it signals:
- Slower growth expectations
- Lower inflation
- More Fed cuts ahead
Analogy: A few bubbles in pasta water = noise. A rolling boil = decisive break. Look for a firm move below 4%, not a temporary dip.
- Key level to watch: 3.75% (tested during April’s “Liberation Day” market scare)
Commodities Snapshot
- Oil: Trading around $63.90, with resistance near $64.86
- Gold: Touched $3,705, now pulling back to $3,661
- U.S. Dollar Index: At a low of 96.74
Markets at Open (6 AM ET)
- Dow Futures: +15 pts
- S&P Futures: -3 pts
- Nasdaq Futures: -20 pts
- Russell 2000: Flat
Europe: Mixed markets
Political Note
Former President Donald Trump and Melania Trump have arrived at Windsor Castle to meet with the British Royal Family before continuing on to a meeting with Prime Minister Keir Starmer.
Key Takeaway
It’s about having a plan — not reacting to every headline.
Markets move in cycles. Success comes from:
- Time in the market (not timing it)
- Clear risk management
- Discipline
Bonus: Rodeo Cowboy Caviar Recipe
(Metaphor for a market rebound — colorful, unexpected, and best enjoyed in good company)
Ingredients:
Vinaigrette
- ⅓ cup olive oil
- ¼ cup red wine vinegar
- 2 garlic cloves (minced)
- 1 tsp sugar
- ½ tsp kosher salt
- ½ tsp black pepper
Salad Base
- 1 can (15 oz) black-eyed peas (rinsed)
- 1 can (15 oz) black beans (rinsed)
- 1 cup corn (fresh or thawed)
- 2 diced plum tomatoes
- ½ small red onion (chopped)
- 1 red bell pepper (diced)
- 1 jalapeño (chopped)
- ½ cup chopped cilantro
- 2 sliced scallions
Instructions:
- Mix dressing: Shake vinaigrette ingredients in a jar until blended.
- Combine ingredients: In a large bowl, mix all salad base items.
- Chill: Refrigerate for at least 2 hours.
- Finish & serve: Add cilantro, scallions, and vinaigrette before serving. Adjust seasoning.
Serve with tortilla chips.