Inspire Portfolio Strategy Insights

Global & Select Strategy Performance

1. All our Global (ETF-centric) and Select strategies slightly underperformed their secular benchmarks for the quarter, apart from the Global Conservative strategy. The higher the allocation to equities, the worse the relative performance. For the trailing 12-month period, both our Select and Global strategies posted strong absolute results ranging from 9.6% on the conservative side of the spectrum to 14.8% in the all-equity strategies. Despite positive absolute results, the strategies modestly underperformed their respective benchmarks (again except the Global Conservative strategy), with the Global strategies slightly outperforming the Select strategies.    
2. On the equity side, the strategies slightly underperformed the MSCI World Index in the quarter primarily due to our overweight allocation to US small cap equities and stock selection within our US large cap and US small cap strategies. For example, in our Global (ETF-centric) strategies, we experienced negative relative performance coming from ISMD (4.5%) and BIBL (8.1%), versus 11.5% for the MSCI World. This was offset by strong relative performance from WWJD (13.3%) and FDLS (13.1%). In our Select models, stock selection within our US Small Cap and US Large Cap sleeves also contributed to relative underperformance.
3. Over the trailing 12-month period, the Global strategies have performed mostly in line with their secular benchmarks, while our Select strategies have modestly underperformed, again due to our overweight positioning to US small cap and underperformance of our US large cap and small cap holdings. Our US large cap ETFs (BIBL & PTL) and Select sleeve have underperformed given the lack of exposure to the large mega-cap stocks (due to our BRI screens) that performed very well in the period.
4. On the fixed income side, the bond portion of the 70/30 strategies outperformed the Barclays US Agg in the quarter by 0.8% given IBD’s shorter duration (3.7 versus 6.0 years) as interest rates declined on the shorter end of the yield curve while increasing on the longer end. Over the trailing 12 months, IBD posted strong absolute results (7.1%) and outperformed the BC Agg by over 1%, again due to the steepening of the yield curve.

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Asset Class Model in the Spotlight: Inspire U.S. Small Cap

The US Small Cap sleeve underperformed the S&P 600 Index in the second quarter, returning -2.9% versus 4.9% for the index. For the trailing one-year period, the sleeve posted a return of -11.0% and significantly underperformed its index that returned 4.6%. Weak performance in the quarter and year-to-date from the strategy’s Health Care, Consumer Staples, and Industrials holdings were the main drivers of the underperformance. Specific detractors included Myriad Genetics (-77.9%), Edgewell Personal Care (-40.7%), and Heartland Express (-29.4%). Although it is disappointing to see small cap companies continue to underperform, we believe that our overweight positioning, as well as our small cap selection process, will bear fruit when investors turn attention to the broader markets and small and mid-cap stocks come into favor.

Capital Market Returns

See quarterly review and commentary for more information.

Inspire ETF Returns

See quarterly review and commentary for more information.

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Disclosures

Advisory services are offered through Inspire Investing, LLC, a Registered Investment Adviser with the SEC. All expressions of opinion are subject to change without notice and are provided for informational purposes only. Nothing in this commentary should be construed as an offer, solicitation, recommendation, or endorsement of any particular security, strategy, or investment product. Investing involves risk, including the potential loss of principal. Please consult your financial advisor before making any investment decision.

Past performance is not indicative of future results. All performance figures referenced herein are historical and may not reflect current or future market conditions. Actual investor outcomes may vary. There is no assurance that any investment strategy will achieve its objectives or avoid losses.

Inspire Investing, LLC serves as the investment adviser to certain proprietary ETFs used in Inspire portfolios. Inspire receives management fees from these ETFs, creating a potential conflict of interest. Inspire seeks to mitigate this conflict through policies and procedures that ensure recommendations are made in clients’ best interests and consistent with their unique goals and risk profiles. Additional details can be found in Inspire’s Form ADV Part 2A.

Information and data referenced in this commentary may be obtained from third-party sources believed to be reliable, including Bloomberg and MSCI, but Inspire makes no representation as to their accuracy or completeness. All trademarks and service marks are the property of their respective owners.

Certain statements may include forward-looking information based on current beliefs, expectations, and assumptions. These statements are not guarantees of future performance and involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially. Inspire undertakes no obligation to update or revise any forward-looking statements.