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Quarterly Review & Commentary

Prepared by Darrell W. Jayroe, CFA, CFP®, CKA®



SENIOR PORTFOLIO MANAGER





For institutional use only
Economic Summary

The U.S. economy continued its grind higher in the second quarter of 2024. Initial estimates are that U.S. Real (i.e. inflation-adjusted) Gross Domestic Product (GDP) grew 2.8% (annualized) during the second three months of the year. This comes on the heels of a respectable 1.4% GDP growth during the first quarter. While not robust, the economy has continued to defy skeptics and still gives every indication of having achieved the rare feat of a “soft landing”.

Despite heightened anxieties for the economy, jobs, and inflation, the U.S. consumer continues to prove to be resilient, driving the economy higher. The June Unemployment Rate came in at 4.1%, at levels that have not been seen since late 2021. Average hourly earnings, now at $35.00/hr, have continued to grow about 4% annually. Meanwhile, on the inflation front, while U.S. consumers continue to be understandably concerned about the increase in overall price levels in recent years, the actual pace of the increase in prices (i.e. inflation) has continued to slow. The most recent Consumer Price Index (June 2024) showed an increase of just 3% over the prior 12 months, down substantially from the highs seen in 2022 and trending slowly toward the Federal Reserve’s target inflation rate of 2.0%.

The combination of declining inflation with the previously mentioned pace of wage increases has given U.S. workers positive real wage growth. While unease is palpable, especially coming into the upcoming election cycle, the environment looks favorable going forward for the spending activity of U.S. households and thereby the overall economy.

The Federal Reserve continues to be patient in its deployment of monetary policy towards its dual mandate of 1) full employment and 2) price stability. While the market has been eager for a decrease in the overnight Federal Funds rate, the Central Bank has kept it steady at 5.25%, much longer than anticipated. Navigating around the November elections will be tricky as there is usually a strong motivation to maintain independence and not to have the appearance of influencing the voting outcome. Given that, the markets are now anticipating the Federal Reserve’s first rate cut to come in September.

Despite the rosy economic environment, investors’ attention is being increasingly drawn to the nation’s very contentious and divisive political environment. While emotions run very high, it is very difficult to discern what the potential economic implications might be given all that is still at play. One thing is certain, our nation’s federal debt continues to surge higher, now more than $100,000 per person. The political will to solve this menacing risk is starkly absent from the national discourse in this election cycle.

Beyond that, there are other domestic matters that have U.S. investors’ attention. These include commercial real estate weakness, U.S. home affordability challenges, etc.

Globally, many nation’s economies have also enjoyed moderating inflation and respectable growth this past quarter. Like the U.S., their employment and interest rate outlooks are less dire than many had expected. However, major geopolitical concerns (Gaza conflict, Ukraine War, upcoming Paris Olympics, etc.) continue to keep investors wary. Foreign currencies (esp. the Japanese Yen) continued their weakness this past quarter. While on the surface, this currency weakness may appear detrimental for those countries, it does make for competitive pricing power for their exports on the global markets. As a result, U.S. investors are wise to leverage the strength of their dollar for potential bargain shopping investment opportunities abroad.

So, while economic conditions remain buoyant, risks continue to abound, and investors should remain diligent. Long-term goals should be the primary focus no matter whether short-term distractions may materialize.

Sources:
Bureau of Economic Analysis
Bureau of Labor Statistics
International Monetary Fund
The Conference Board

Dr. Erik Davidson, CFA
Chief Economic Advisor
DR. ERIK DAVIDSON, CFA is the Chief Economic Advisor for Inspire Investing. Previously, Dr. Davidson served as the Chief Investment Officer for Wells Fargo Private Bank, leading an investment team of over 400 professionals who managed more than $200 billion in assets. Dr. Davidson holds a doctorate degree from the DePaul University’s Kellstadt Graduate School of Business and is a professor at Baylor University teaching behavioral finance.
The Stock Market

The 2nd quarter took a break from the rally that the markets started last October. The US Large Cap market regained some of the upward momentum in mid-May but the small and mid-cap markets languished with poor performance for the entire quarter. The S&P 500 Index was able to finish the quarter ahead of the international index with the Mid Cap and Small Cap Indexes finishing the quarter far behind.  Investors’ optimism about the economic recovery waned a bit as fear of higher interest rates for longer stayed on the table. The S&P 600 Small Cap index and the S&P 400 Mid Cap Index ended the quarter with a dismal return of -3.11% and -3.45% respectively, while the S&P 500 and the International Index indexes posted gains of 4.28% and 0.91% respectively. 

(Source: Bloomberg)

Over the past 12 months, the stock market witnessed a generally positive trajectory across all the major equity indexes. The S&P 500 experienced significant growth during this period, reflecting a strong rebound from the bear market of 2022 turning in a one-year number of 24.54%. Similarly, the S&P 400 and S&P 600, representing mid-cap and small-cap companies, also enjoyed overall gains. The S&P 400 mid-cap index posted a one-year return of 13.55% outpacing the S&P 600 small-cap index which returned only 8.58% during the same time frame. These indexes benefited from the broader market rally, driven by optimism about economic recovery and hope that if a recession comes in 2024, it will be a relatively “soft landing”.  As for the S&P International 700 index, it followed a similar pattern with variations influenced by regional economic factors and geopolitical events and fell short of the US large-cap market and slightly underperformed the U.S. mid-cap market with a respectable 12-month return of 12.85%. Overall, the past 12 months exhibited positive market sentiment even while facing continued headwinds of inflation numbers not falling as fast as the markets previously had hoped. Even though we are in the first innings of the new bull market and markets will probably still move higher over the next 12 to 24 months, there is a high probability that we could see some profit taking which could give us a 10%+ correction during the next few months.  If that happens, remain invested and stay focused on the long-term opportunities in a well-diversified global portfolio.

(Source: Bloomberg)

Economic Indicators and Calendars

Inflation - CPI Month over Month Release Date & Time Period Survey Actual
CPI MoM 01/11/2024 08:30 Dec 0.20% 0.30%
CPI MoM 02/13/2024 08:30 Jan 0.20% 0.30%
CPI MoM 03/12/2024 08:30 Feb 0.40% 0.40%
CPI MoM 04/10/2024 08:30 Mar 0.30% 0.40%
CPI MoM 05/15/2024 08:30 Apr 0.40% 0.30%
CPI MoM 06/12/2024 08:30 May 0.10% 0.00%
CPI MoM 07/11/2024 08:30 Jun 0.10% -0.10%
CPI MoM 08/14/2024 08:30 Jul
CPI MoM 09/11/2024 08:30 Aug
CPI MoM 10/10/2024 08:30 Sep
CPI MoM 11/13/2024 08:30 Oct
CPI MoM 12/11/2024 08:30 Nov
CPI MoM 01/11/2025 08:30 DEC
(Source: Bloomberg)

Inflation came in at 0.30% (Month over Month) in April, beating the expectation of a 0.40% increase, and came in flat at 0.00% (Month over Month) in May, beating the expectations of a 0.10% increase. The estimate for the month-over-month number in June was for an increase of 0.10% but came in at -0.10% when it was released on July 11th, exceeding expectations by -20 bps. This unexpected decrease is a good sign, as we need to see month-over-month numbers stay in the 0.0% to 0.20% territory for the next several months so that the CPI year-over-year number can come back towards the 2 to 2.5% level over the next 12 months. 

(Source: Bloomberg)
Economic Growth Release Date & Time Period Survey Actual
GDP 01/25/2024 08:30 4Q A 2.0% 3.3%
GDP 02/28/2024 08:30 4Q S 3.3% 3.2%
GDP 03/28/2024 08:30 4Q T 3.2% 3.4%
GDP 04/25/2024 08:30 1Q A 2.5% 1.6%
GDP 05/30/2024 08:30 1Q S 1.3% 1.3%
GDP 06/27/2024 08:30 1Q T 1.4% 1.4%
GDP 07/25/2024 08:30 2Q A
GDP 08/29/2024 08:30 2Q S
GDP 09/26/2024 08:30 2Q T
GDP 10/30/2024 08:30 3Q A
GDP 11/27/2024 08:30 3Q S
GDP 12/19/2024 08:30 3Q T
(Source: Bloomberg)  (A= Advance; S= Second: T= Third)

GDP growth came in weaker than the initial expectation of +2.5% for the 1st Quarter, with an actual +1.6% growth rate for the quarter in the Advance Release. The expectation was revised downward to 1.3% for the Second release and came in on point at 1.3%. The Third revision raised the expectation slightly to 1.4% and the actual print came in as expected. The debate among economists and market pundits changed during the past quarter to “When will the Fed be forced to lower interest rates due to the slowdown in the economy” with the weak GDP numbers recently and weaker numbers expected in the current quarter.  

The probability of a recession has dropped from 65% in July to only 30% presently according to the Bloomberg survey.   The yield curve (10s - 2s) remains inverted and has been inverted for over 500 consecutive days which is a multi-decade high.

(source: Bloomberg)
Labor Market Release Date & Time Period Survey Actual Revised
Unemployment Rate 1/5/2024 8:30 Dec 3.8% 3.7%
Unemployment Rate 2/2/2024 8:30 Jan 3.8% 3.7%
Unemployment Rate 3/8/2024 8:30 Feb 3.7% 3.9%
Unemployment Rate 4/5/2024 8:30 Mar 3.8% 3.8%
Unemployment Rate 5/3/2024 8:30 Apr 3.8% 3.9%
Unemployment Rate 6/7/2024 8:30 May 3.9% 4.0%
Unemployment Rate 7/5/2024 8:30 Jun 4.0% 4.1%
Unemployment Rate 8/2/2024 8:30 Jul
Unemployment Rate 9/6/2024 8:30 Aug
Unemployment Rate 10/4/2024 8:30 Sep
Unemployment Rate 11/1/2024 8:30 Oct
Unemployment Rate 12/6/2024 8:30 Nov
Unemployment Rate 1/5/2025 8:30 Dec
Nonfarm Payrolls (Change) 1/5/2024 8:30 Dec 170k 216k 182k
Nonfarm Payrolls (Change) 2/2/2024 8:30 Jan 196k 353k 290k
Nonfarm Payrolls (Change) 3/8/2024 8:30 Feb 198k 275k 356k
Nonfarm Payrolls (Change) 4/5/2024 8:30 Mar 210k 303k 270k
Nonfarm Payrolls (Change) 5/3/2024 8:30 Apr 234k 175k 303k
Nonfarm Payrolls (Change) 6/7/2024 8:30 May 184k 272k 175k
Nonfarm Payrolls (Change) 7/5/2024 8:30 Jun 191k 206k 272k
Nonfarm Payrolls (Change) 8/2/2024 8:30 Jul
Nonfarm Payrolls (Change) 9/6/2024 8:30 Aug
Nonfarm Payrolls (Change) 10/4/2024 8:30 Sep
Nonfarm Payrolls (Change) 11/1/2024 8:30 Oct
Nonfarm Payrolls (Change) 12/6/2024 8:30 Nov
Nonfarm Payrolls (Change) 1/5/2025 8:30 Dec
(Source: Bloomberg)

The Unemployment rate rose to 3.9% in April after falling back to 3.8% in March. In May we saw the unemployment rate jump to 4.0%, and it rose again in June to 4.1%, both months beating expectations. Now that we have broken through the 4% level it is possible we could see the Unemployment Rate continue to rise for the rest of 2024 as the economy slows and if layoffs increase. 

Nonfarm Payrolls continue to have solid monthly numbers with June coming in at 206k new jobs, which was stronger than the estimate of 191k.  If job growth remains strong in the face of a potential recession the Federal Reserve will not be inclined to cut interest rates as soon as some analysts are predicting. We are now discounting the possibility that there will be any interest rate cuts in 2024.

Monetary Policy - Federal Reserve Meeting Date Rate Decision (%) For Against
FOMC Meeting 01/31/2024 0.00 12 0
FOMC Meeting 03/20/2024 0.00 12 0
FOMC Meeting 05/01/2024 0.00 12 0
FOMC Meeting 06/12/2024 0.00 12 0
FOMC Meeting 07/31/2024
FOMC Meeting 09/18/2024
FOMC Meeting 11/07/2024
FOMC Meeting 12/18/2024
(Source: Bloomberg)

The Federal Open Market Committee left the Federal Funds rate unchanged during the two meetings held during the 2nd quarter as no one believes there will be any more interest rate increases in this cycle. Based on Chair Powell’s recent comments, we should not be surprised if we don’t see any rate cuts until later this year if at all as he has reiterated that they will remain data-driven and the data is showing a slowing but resilient economy. Although many analysts fully expect the rate cut cycle to begin before the end of 2024 a few economists are saying there will be no interest rate cuts until 2025.  As the Federal Reserve was late to start raising interest rates, they will likely be late to cut interest rates as the economy starts to slow causing unnecessary damage to the economy in their efforts to avoid sparking more inflation.

(Source: Bloomberg)
Inspire 100 ETF [NYSE: BIBL]
  • BIBL underperformed the S&P 500 Index by 643 bps for the quarter with returns of -2.15% and 4.28% respectively.  
  • The underperformance of BIBL to the S&P 500 index is due to weaker performance in the Communications Services, Consumer Discretionary, Consumer Staples, and Technology sectors vs. the sector returns in the benchmark.
  • The exposure to smaller companies in BIBL in these four sectors hurt BIBL as the mega-cap growth stocks in the Communications Services and Technology sectors drove the strong performance of the S&P 500 during the quarter.
  • We believe as the new bull market gains momentum, BIBL is well positioned to outperform the S&P 500 due to the tilt to the smaller side of the market cap spectrum as well as its strong core positioning benefiting from both value and growth exposure when the appetite for the mega-cap growth stocks starts to wane.
(Source: Bloomberg)

Past performance is no guarantee of future results. The performance data quoted here represents past performance. Current performance may be lower or higher than the performance data quoted above. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. For performance data current to the most recent month end, please call 877.658.9473.

Performance data as of
6/30/2024
. You cannot invest directly in an index. The S&P 500 is a stock market index that measures the stock performance of 500 large companies listed on stock exchanges in the United States. The Inspire 100 Index is a rules based, passive index which tracks the stock performance of the one-hundred highest Inspire Impact Scoring companies in the United States with market capitalizations above $13B. The performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investoror’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by visiting www.inspireETF.com. Total annual operating expenses are 0.42%. Net expense ratio for the fund is 0.35%. The Fund’s adviser has contractually agreed to reduce fees and/or absorb expenses until at least March 31, 2023.
Inspire Global Hope ETF [NYSE: BLES]
  • BLES underperformed the S&P Global 1200 index during the 2nd quarter with a return of -2.06% vs 3.20 % for the global index. 
  • With the disappointing performance of the international markets in relation to the U.S. large-cap market during the 2nd quarter, BLES diverged from the global index for the quarter in a negative way.
  • It appears that the underperformance of BLES to the global index is due to strong underperformance in the North American region, which is directly attributable to the strong performance of the mega-cap growth stocks in the S&P 500 which are not held in BLES.  
  • We believe that the tilt to the smaller end of the large-cap spectrum of BLES will show favor as the economic numbers continue to improve over the next 6 to 12 months.
(Source: Bloomberg)

Past performance is no guarantee of future results. The performance data quoted here represents past performance. Current performance may be lower or higher than the performance data quoted above. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. For performance data current to the most recent month end, please call 877.658.9473.

Performance data as of
6/30/2024
. You cannot invest directly in an index. The S&P Global 1200 Index is a free-float weighted stock market index of global equities from Standard & Poor’s. The index covers 31 countries and approximately 70 percent of global stock market capitalization. Inspire Global Hope Large Cap Equal Weight Index tracks the stock performance of 400 of the most inspiring large cap companies from around the globe. The performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by visiting www.inspireETF.com. Total annual operating expenses are 0.49%.
Inspire Fidelis Multi Factor ETF [NYSE: FDLS]
  • FDLS underperformed the MSCI All Country World ETF by -598 bps.  After a weak start to the quarter, FDLS rallied in line with the global market until mid-May then sharply diverged for the last half of the quarter to finish with a quarterly return of -3.06%.
  • The global exposure to different stocks in relation to the market cap weighted MSCI ACWI Index, which is dominated by the mega-cap growth stocks in the S&P 500, was the main contributor to the underperformance for the 2nd quarter.
  • We continue to believe that the globally diversified allocation of FDLS to US large, mid, and small-cap, international, and emerging markets stocks as well as the disciplined multi-factor approach will be a good complement to our other ETFs as the new bull market gains momentum but will not always be in favor relative to the broad markets.
(Source: Bloomberg)

Past performance is no guarantee of future results. The performance data quoted here represents past performance. Current performance may be lower or higher than the performance data quoted above. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. For performance data current to the most recent month end, please call 877.658.9473.

Performance data as of
6/30/2024
. You cannot invest directly in an index. The S&P Global 1200 Index is a free-float weighted stock market index of global equities from Standard & Poor’s. The index covers 31 countries and approximately 70 percent of global stock market capitalization. Inspire Global Hope Large Cap Equal Weight Index tracks the stock performance of 400 of the most inspiring large cap companies from around the globe. The performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by visiting www.inspireETF.com. Total annual operating expenses are 0.49%.
Inspire Momentum ETF [NYSE: GLRY]
  • GLRY continued the upward ‘momentum’ from the rally that started in the 4th quarter of 2023, which saw broad markets break out from the correction. GLRY outperformed the S&P 400 Midcap index in Q2, ending the quarter up +0.47% versus -3.45% for the index.
  • The 2nd quarter was a rollercoaster ride for investors as the rally in the first quarter turned negative during April with some understandable profit-taking. GLRY rallied in line with the mid-cap index in May but maintained strength when the mid-cap index diverged to the downside after mid-May.
  • Looking ahead, the methodology has not changed and we will continue looking for great companies using the FEVRR methodology.  We will find companies that have strong financial health and sustainable earnings, which lets them make strategic decisions in a similar or a lower rate environment.  We will find companies that have attractive valuations and price momentum, which assists with entry and exit points.
(Source: Bloomberg)

Past performance is no guarantee of future results. The performance data quoted here represents past performance. Current performance may be lower or higher than the performance data quoted above. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. For performance data current to the most recent month end, please call 877.658.9473.

Performance data as of
6/30/2024
. You cannot invest directly in an index. The S&P SmallCap 400 Index measure the mid cap segment of the U.S. equity market. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by visiting www.inspireETF.com. Total annual operating expenses are 1.02%. Net expense ratio for the fund is 0.80%. The Fund’s adviser has contractually agreed to reduce fees and/or absorb expenses until at least March 31, 2023. 
Inspire Small/Mid Cap ETF [NYSE: ISMD]
  • ISMD performed in line with both the S&P Small Cap 600 index and the S&P Midcap 400 Index for the 2nd quarter with a total quarterly return of -3.44%, vs the mid-cap index down -3.45% and the small-cap index down -3.11%.
  • The mid-cap market and the US small-cap market have yet to regain the momentum that led all markets to end the 4th quarter of 2023 as the US large-cap market continues to power higher.
  • The equal weighting of the 500 stocks in ISMD was in line with the market cap weighted small and midcap indexes showing that the correlation between the small and midcap markets and ISMD remains strong.
(Source: Bloomberg)

Past performance is no guarantee of future results. The performance data quoted here represents past performance. Current performance may be lower or higher than the performance data quoted above. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. For performance data current to the most recent month end, please call 877.658.9473.

Performance data as of
6/30/2024
. You cannot invest directly in an index. The S&P Small Cap 600 Index measure the small cap segment of the U.S. equity market. The Inspire Small/Mid Cap Impact Equal Weight Index tracks the stock performance of 500 of the most inspiring small and mid cap companies in the U.S. The performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by visiting www.inspireETF.com. Total annual operating expenses are 0.48%.
Inspire 500 ETF [NYSE: PTL]
  • In the first full quarter of our newest ETF, PTL underperformed the S&P 500 Index by 587 bps for the quarter with returns of -1.59% and 4.28% respectively.  
  • The underperformance of PTL to the S&P 500 index is due to weaker performance in the Consumer Staples and Technology sectors vs. the sector returns in the benchmark.
  • The exposure to smaller companies in PTL in these two sectors hurt PTL as the mega-cap growth stocks in the Communications Services and Technology sectors drove the strong performance of the S&P 500 during the quarter.
  • We believe as the new bull market gains momentum, PTL is well positioned to outperform the S&P 500 due to the tilt to the smaller side of the market cap spectrum as well as its strong core positioning benefiting from both value and growth exposure when the appetite for the mega-cap growth stocks starts to wane.

Past performance is no guarantee of future results. The performance data quoted here represents past performance. Current performance may be lower or higher than the performance data quoted above. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. For performance data current to the most recent month end, please call 877.658.9473.

Performance data as of
6/30/2024
. You cannot invest directly in an index. The S&P Small Cap 600 Index measure the small cap segment of the U.S. equity market. The Inspire Small/Mid Cap Impact Equal Weight Index tracks the stock performance of 500 of the most inspiring small and mid cap companies in the U.S. The performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by visiting www.inspireETF.com. Total annual operating expenses are 0.48%.
Inspire Tactical Balanced ETF [NYSE: RISN]

The Inspire Tactical Balanced ESG ETF (NYSE: RISN) returned -3.70% in the 2nd quarter and +5.50% (annualized) since its inception on July 15, 2020. This quarter, the fund underperformed its benchmark, the S&P Target Risk Moderate TR Index, which returned +1.11%.

We attribute this underperformance to our commitment to biblically aligned stock holdings. The benchmark S&P Target Risk Moderate TR (AOM) allocates about 25% to the S&P 500, which has experienced significant price increases due to P/E ratio expansion. This rise is driven by anticipated future earnings growth from companies benefiting from generative AI technology. However, the price increase is not currently supported by EPS growth, suggesting a potential correction in the largest companies within the S&P 500.

Our stock allocation favors smaller companies that are still in the “Large Cap” market segment, which we believe will be advantageous if a correction occurs soon.

We maintain an estimated 80% allocation to US stocks with a positive Inspire Impact Score. Our focus remains on large-cap, biblically aligned stocks with strong historical revenue/profit growth, low debt, and high returns on invested capital that are selling at lower P/E ratios compared to their historical averages. Despite some underperformance this quarter, this approach has proven beneficial, and we will continue to use this strategy moving forward.

For the 20% of the fund not allocated to equities, we continue to hold short-term floating rate government bonds as a defensive position. Although we may shift to standard short-term government bonds (non-floating rate) soon, the current asset class has served us well, and we will maintain it until rates begin to decline. 

— Jacob Chandler, Manager

Past performance is no guarantee of future results. The performance data quoted here represents past performance. Current performance may be lower or higher than the performance data quoted above. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. For performance data current to the most recent month end, please call 877.658.9473.

Performance data as of
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. You cannot invest directly in an index. The S&P Target Risk Moderate Index is designed to measure the performance of moderate stock-bond allocations to fixed income while seeking to increase opportunities for higher returns through equities. The performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by visiting www.inspireETF.com. Total annual operating expenses are 0.71%.
Inspire International ETF [NYSE: WWJD]
  • WWJD was down -0.71% in the 2nd quarter, underperforming the S&P International 700 TR Index return of 0.91%, an underperformance of -162 basis points. 
  • It appears that the underperformance of WWJD to the International index is attributable to underperformance in the Asia Pacific region.
  • Being highly correlated with the index during most of the quarter shows that the diversification of the fund with only 200 positions is well positioned to compete against the international index with 700 positions in the coming year.
  • We remain confident that the discipline of the fund should allow for the outperformance of WWJD in the coming year as it is equally weighted, and the index is market cap weighted.
(Source: Bloomberg)

Past performance is no guarantee of future results. The performance data quoted here represents past performance. Current performance may be lower or higher than the performance data quoted above. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. For performance data current to the most recent month end, please call 877.658.9473.

Performance data as of
6/30/2024
. You cannot invest directly in an index. The S&P International 700 measures the non-U.S. component of the global equity market through an index that is designed to be highly liquid and efficient to replicate. The Inspire Global Hope Ex-US Index intends to track the price movements of a portfolio of 200 of the most inspiring, biblically aligned large cap companies outside of the United States. The performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by visiting www.inspireETF.com. Total annual operating expenses are 0.69%.
The Bond Market

Yields Rose Again - the yield curve continued the recent course and rose across most of the rate spectrum, giving the fixed income markets relatively flat to slightly positive returns for the quarter. Interest rates from the 2 yr. to 30 yr. maturities all increased in the 2nd quarter, as the Federal Reserve gave mixed signals that although they have completed their policy of raising interest rates, they are still not confident about when interest rates could start falling.

As of the end of the 2nd quarter, the 3-month T-Bill yield fell slightly from 5.371% to 5.358% vs the 10-year US Treasury which jumped by over 19 bps from 4.201% to 4.397%. 

The 2-year U.S. Treasury yield spiked from 4.621% to 4.755%, a 13 bps increase as the 5-year yield went up from 4.213% to 4.377% (an increase of over 16 bps) and the 30-year treasury saw a rise from 4.344% to finish the quarter at 4.559% (an increase of over 21 bps).

The probability of a recession has moderated as the economy has not slowed as much as expected and the employment numbers and consumer spending remain strong. Although a recession is probably avoidable the estimate remains around 30% according to the Bloomberg survey results.

Source: Bloomberg 6-30-2024
Inspire Corporate Bond ETF [NYSE: IBD]
  • IBD was up 0.30% in the 2nd quarter, slightly underperforming the fixed income benchmark of the Bloomberg Barclays US Intermediate Credit Index, which was up only 0.73%.  
  • The increase in the yield curve brought slightly positive to flat performance for intermediate bonds in Q2 as well as the longer end of the yield curve. 
  • With the Federal Reserve having completed its process of raising interest rates over the past two years, it is possible that the yield curve could shift in a parallel fashion to the downside in the coming quarters allowing strong returns during the next 12 to 18 months.
(Source: Bloomberg)

Past performance is no guarantee of future results. The performance data quoted here represents past performance. Current performance may be lower or higher than the performance data quoted above. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. For performance data current to the most recent month end, please call 877.658.9473.

Performance data as of
6/30/2024
. You cannot invest directly in an index. The Bloomberg Barclays US Intermediate Credit Index measures the performance of investment grade, US dollar-denominated, fixed-rate, taxable corporate and government-related debt with less than ten years to maturity. The Inspire Corporate Bond Impact Equal Weight Index is comprised of 250 investment grade, intermediate term corporate bonds issued by some of the most inspiring large cap “blue chip” companies in the United States. The performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by visiting www.inspireETF.com. Total annual operating expenses are 0.44%.
Things to Watch

Inflation, Money Supply, and Central Bank Response

The May CPI month-over-month reading was flat at 0.0%, which was below the expected 0.1%. Year-over-year inflation is down to 3.3%. Based on Chair Powell’s recent comments, we have reached a terminal level of interest rates of around 5.5%, and rates are expected to fall starting in late-2024. Many investors are of the belief that the inflation scare is well behind us. However, core inflation remains high at 3.4% and well above the Fed’s target of 2.0%, so we will likely see a slower lowering of interest rates than investors initially thought. We will continue to closely monitor monthly inflation readings and the Fed’s response as this will continue impacting capital market returns and volatility in the months and years ahead.  

GDP, Yield Curve, Employment, & Consumer Confidence

The final first quarter GDP figure came in at 1.4%, below the consensus of 2.5%. This was a weaker quarter as consumer spending is starting to slow and we believe we are in a trend of slowing growth which could get worse especially if personal consumption, business investment, and home building continue to slow for the remainder of 2024. In addition, the yield curve remains inverted (which generally occurs leading up to a recession) and the Conference Board’s leading index has never declined this much in six months without a recession. We have now had over 630 consecutive days of yield curve inversion, the longest on record. With inflation still running high and the labor market remaining strong, the Fed may be forced to keep rates high to try to bring down inflation, or at least keep them higher than investors believe. Therefore, the risk of a recession occurring in the next few quarters is still on the table. We will continue to keep a close eye on growth figures going forward. 

Geopolitical Risks

The global capital markets continue to face several geopolitical risks for the remainder of 2024 and into 2025, which could significantly impact investor sentiment and market stability. One key concern is the ongoing war in Israel and the Middle East against the terrorist proxies of Iran in Hamas, Hezbollah, and the Houthi rebels. The Russia/Ukraine war appears to have reached a stalemate but neither side is showing any willingness to negotiate an end to the fighting yet. Political conflicts with China can also introduce instability and raise concerns about the business environment in the next several months. The heated political environment here in the US is also something to consider as everyone shifts their attention to the presidential election in November. This could result in increased market uncertainty, fluctuations in stock prices, and the need for us to closely monitor global and domestic developments and assess their potential impacts.

Closing Remarks

Although we still believe that we are in the first leg of the new bull market we are disappointed to see the negative performance this quarter for most of our ETFs. We must keep in mind that does happen periodically even during the first stages of a new bull market.  We will not be surprised to see some profit-taking during the third quarter in the mega-cap growth stocks that have caused our ETFs to underperform their secular benchmarks during this past quarter. This could bring a normal correction of -10% or more in the next few months but it could also be the catalyst to shift attention to the broader large-cap market as well as the small and mid-cap that have been ignored of late.  If this does happen we would look for our ETFs to come into favor and possibly outperform the secular counterparts. We are still facing the same headwinds from the last couple of years – inflation, high interest rates, war in Ukraine, war in Israel, and an upcoming presidential election– we need to remain patient and focused on long term opportunities.

Whatever may come, our Lord is still in control. We remain thankful for the provision, protection, and blessings that we receive from our Heavenly Father and are looking expectantly to what God has in store for the rest of 2024 and beyond.

We are thankful to each of you for bringing Glory and Honor to our Heavenly Father and our Savior Jesus Christ as you serve your clients through Biblically Responsible Investing.

Blessings,

Darrell W. Jayroe, CFA, CFP®, CKA®
Senior Portfolio Manager
Darrell Jayroe, CFA, CFP, CKA, serves as Inspire’s Senior Portfolio Manager responsible for leading the firm’s Investment Committee, as well as serving as Lead Portfolio Manager for Inspire’s ETFs and SMA strategies. Darrell has been with the firm since 2016. Prior to joining Inspire, Darrell was a Vice President and Sr. Portfolio Manager for the Bank of Oklahoma trust department for 12 years where he was responsible for managing accounts for high net worth families, trusts, foundations and institutions. Darrell started his career as an investment advisor in 1994 with PaineWebber in Oklahoma City. Darrell received a B.A. and Masters degree from Southern Nazarene University in Bethany, Oklahoma. He is a CFA (Chartered Financial Analyst) charter holder and is a CFP® (Certified Financial Planner®) licensee. He is a member of the CFA Institute and a member and Past President of the CFA Society of Oklahoma. He is also a member of Kingdom Advisors and holds the CKA® (Certified Kingdom Advisor®) designation. Darrell and his wife, Beth, have been married since 1982 and have two daughters, a son in law and three grandchildren.