The Federal Reserve wrapped up its latest Open Market Committee meeting last week and, as expected, maintained its fed funds target rate at the 4.25-4.50% level. This was the second consecutive meeting at which the central bank held policy steady, after cutting rates three times in late 2024. The non-decision indicates that the Fed still has concerns about lingering inflation and is carefully monitoring the overall economy. CPI inflation has fallen from readings above 9.0% in 2022 to readings below 3.0% -- but lately has failed to continue its downward trend toward the central bank's goal of 2.0%. Still, the unemployment rate is historically low and GDP growth has risen at a rate faster than the long-run average of 2.0% for nine of the past 10 quarters. The economy is not in dire need of lower rates. Yet. Meanwhile, the Fed will be taking a less-visible step toward helping the economy by slowing the pace of its balance sheet runoff. The monthly cap on U.S. Treasuries has been lowered from $25 billion to $5 billion. We think this move is due to liquidity issues in the money market sector. Looking ahead, the Fed will keep a close watch on economic data, of course, and will also be monitoring the potential impacts from any upcoming policy changes related to trade and tariffs, immigration, fiscal stimulus, and regulations. The central bankers also released their economic and interest-rate projections for the next three years. These forecasts call for economic growth in the 1.8%-2.0% range through 2027, and an inflation rate that moves down to 2.0% by 2027. At that point, the Fed anticipates its federal funds target rate will be 3.0%-3.25%, implying a real yield of about 1.25%.

Restaurant Brands International Inc. was created in 2014 when 3G Capital, a Brazilian private equity firm, backed Burger King's $11.4 billion acquisition of Tim Hortons. 3G Capital owns more than 41% of Restaurant Brands International's common stock. QSR consists of Burger King (the world's second-largest quick-service restaurant chain), Tim Hortons (Canada's second-largest chain), and Popeye's Louisiana Kitchen, which it acquired in March 2017. In December 2021, Restaurant Brands acquired Firehouse Subs, a national fast-food chain with more than 1,200 locations. The company has more than 31,000 restaurants worldwide. Franchisees own 95% of these restaurants. About 44% of revenue comes from international markets.

Tuesday was a strange day for the S&P 500 (SPX) as all the losses occurred by 10:00 a.m. After that, the index went sideways, trading in a range between 5,598 and 5,628 for the rest of the session. The other major indices did the same thing as market participants seemingly decided to take the rest of the day off. Market breadth cooled after two straight days of strength. Consumer Discretionary dropped 1.8% (as TSLA fell another 5%), Information Technology dipped 1.5% (as NVDA and AVGO fell 3%), and Communication Services fell 1.4% (on a 2.3% drop in GOOGL and a 3.7% drop in META). Even the defensive Consumer Staples sector gave back over 1%. Energy saw a minor 0.2% gain. According to www.stockcharts.com data, the stock market posted two breadth thrusts in a row (on Friday and Monday) after a 10% correction. While this does not rule out a retest of the lows or a lower low, returns going forward from two months to a year almost always have been very good. NYSE advances/total issues were in the low 80%, while NYSE advancing volume/total volume was between 88% and 90% on those two days. Gamma Exposure, which refers to the sensitivity of existing option contracts to changes in the underlying price of the S&P 500, has dropped into an extreme area that historically has been bullish for stocks in the intermediate term. In addition, the SKEW Index, which is an indicator designed to measure market risk at any given point in time, has flashed a bullish sign based on its 13-week rate-of-change. Obviously, market conditions remain quite fluid and headline risk has certainly not disappeared.

Restaurant Brands International is one of the largest restaurant companies in the world, with approximately $44 billion in 2024 systemwide sales across a footprint that spanned more than 32,000 restaurants and more than 100 countries. The firm generates revenue primarily from retail sales at its company-owned restaurants, royalty fees and lease income from franchised stores, and from its Tim Hortons supply chain operations. Formed in 2014 after 3G Capital’s acquisition of Tim Hortons International, the RBI portfolio is split among Burger King (7,082 units), Tim Hortons (4,539 units), Popeyes Louisiana Kitchen (3,520 units), Firehouse Subs (1,345 units), and international franchise units of those banners (15,639) as of year-end 2024.