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The 2024 U.S. presidential election has reshaped the investment landscape, creating substantial growth potential for smaller companies. Inspire’s U.S. Equity ETFs, which tend to emphasize smaller market cap exposure in comparison to secular counterparts, are strategically positioned to benefit from these shifting dynamics. While these ETFs previously struggled to compete with the mega-cap-dominated S&P 500, the current market conditions may create a more favorable environment for smaller-cap stocks, potentially supporting a recovery in this segment.
Figure 1 compares the weighted average market capitalization of the S&P 500 and Inspire’s U.S. Equity Index Funds (Inspire 500 ETF “PTL”, Inspire 100 ETF “BIBL”, and Inspire Small/Mid-Cap ETF “ISMD”), highlighting this market cap difference and smaller-cap-tilt of Inspire’s U.S. Equity Index Funds.
In recent years, the dominance of mega-cap technology firms in the S&P 500 presented challenges for smaller-cap- focused ETFs, such as Inspire’s U.S. Equity Index funds.
Expected increases in tariffs during the Trump presidency could reduce competition from foreign firms, allowing U.S. small caps to capture greater market share.
Pro-U.S. policies encouraging local production are likely to drive demand for American-made goods and services, which could benefit smaller, more localized companies.
Corporate tax cuts and regulatory rollbacks, hallmarks of the Trump administration, disproportionately benefit small caps. These companies often lack the sophisticated tax strategies of mega-cap companies, and reduced compliance costs free up capital for innovation, hiring, and expansion.
Anticipated Federal Reserve rate cuts are especially advantageous for smaller firms, which tend to rely more on debt for growth. Lower borrowing costs, combined with an economic stimulus- focused agenda, could benefit small/mid cap companies, like those held in Inspire ETFs.
Historically, small-cap stocks have outperformed large-caps in the year following a U.S. presidential election, as illustrated in Figure 2.
These indicators suggest that the challenges faced by small- and mid-cap stocks in recent years may be giving way to a more favorable market environment. Inspire U.S. Equity ETFs, with their distinct small-cap emphasis, are well-equipped to thrive in this new landscape. For investors seeking to capitalize on evolving market dynamics while aligning with biblical values, Inspire ETFs present a unique and compelling opportunity.
1https://www.abrdn.com/en-us/investor/insights-and-research/a-trump-card-for-us-small-caps
This material is provided by Inspire Investing, LLC (“Inspire”) for informational purposes only and should not be construed as investment, tax, or legal advice. Inspire is a Registered Investment Adviser with the U.S. Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training. The views and opinions expressed herein are those of Inspire and are based on available market data as of the date of publication. These views are subject to change without notice and may not reflect future market conditions.
Investing involves risks, including the potential loss of principal. Past performance is not indicative of future results. No assurance can be given that any forecast, projection, or investment strategy discussed in this material will be achieved or be successful. Market and economic conditions are subject to change, and the performance of small-cap investments may be influenced by factors beyond Inspire’s control.
References to specific securities, funds, or investment strategies are for illustrative purposes only and do not constitute a recommendation, solicitation, or offer to buy or sell any security. Investors should conduct their own due diligence and consult with a qualified financial professional before making any investment decisions. The Inspire U.S. Equity ETFs seek to align investments with biblical values, but values-based investing does not guarantee performance or eliminate investment risks.
For additional information about Inspire’s investment strategies, please refer to our Form ADV Part 2A, available at www.adviserinfo.sec.gov.
