Inspire Portfolio Strategy Insights

As of
October 31, 2022
Inspire Global Equity Portfolio
Inspire Global Aggressive Portfolio
Inspire Global Moderate Portfolio
Inspire Global Conservative Portfolio
Inspire Select Equity Portfolio
Inspire Select Moderate Portfolio
Inspire Select Aggressive Portfolio
Inspire Select Conservative Portfolio
Inspire Global Very Conservative Portfolio

1. Capital Market Returns

  • The markets posted mixed results in the month of October.  Most equity markets rebounded strongly as investors adjusted their inflation expectations, while most bond markets continued their descent.  
  • The broad fixed income market (BB US Agg) returned -1.3% in the month as rates ticked up across the maturity spectrum.  YTD the Agg is down 15.7%.        
  • The US large cap market (S&P 500) returned 8.1% in October, bringing the YTD performance to -17.7%. Growth underperformed value by nearly 4.5% in the month and is one of the worst performing asset classes so far this year (-26.6%). Energy stocks surged nearly 25% in the month and are up nearly 65% YTD. US small- and mid-cap stocks outperformed US large caps for the month and are ahead ≈4% YTD.  
  • International developed equities underperformed their US counterparts but still posted positive returns, while emerging markets equities declined over 3%. Mainland Chinese stocks were pummeled (-9.5%) as the country’s economic growth prospects continued to deteriorate. Latin American stocks, on the other hand, continued their dominance and were up 9.7% in the month.  The US dollar (US Dollar Index) was roughly flat for the month but is up nearly 14% YTD.
(Source: Bloomberg)
(Source: Bloomberg)

2. Global & Select Portfolios

  • Given the strong rebound in October, all of the diversified portfolios posted positive returns. The higher the allocation to equities, the stronger the absolute performance.  
  • Our Global and Select strategies outperformed their respective benchmarks for the trailing 1- and 12-month periods, with our Select strategies outperforming their Global counterparts.
(Source: Bloomberg; returns generated using Bloomberg Model Performance which may not match the performance of any specific account.)
(Source: Bloomberg; returns generated using Bloomberg Model Performance which may not match the performance of any specific account.)
  • Our US Large Cap, International Developed, and Emerging Markets sleeves outperformed their benchmarks in October, while the US Mid and US Small underperformed.          
  • Over the trailing twelve months, all of our asset class equity sleeves have significantly outperformed their secular benchmarks.
(Source: Bloomberg; returns generated using Bloomberg Model Performance which may not match the performance of any specific account.)
(Source: Bloomberg; returns generated using Bloomberg Model Performance which may not match the performance of any specific account.)

3. Asset Class Model in the Spotlight: Inspire International Developed

The International Developed sleeve outperformed the MSCI EAFE in the month of October by nearly 3% and is ahead by over 1.0% over the last three months. The main contributors in the month were the portfolio’s stock selection within the industrials, energy, and utilities sectors.  Main contributors within industrials included AerCap (+26%), Ryanair Holdings (+17.9%) and Atlas Copco (+16.6%).  Within energy, the main contributors included TechnipFMC (+25%) and Eni SpA (+24.6%), and within utilities, the main contributors included Centrica (+12.5%) and United Utilities (+9.7%). In addition, an underweight to the underperforming consumer staples sector benefited results.

4. Outlook and items we are monitoring in the coming month(s):

  • Inflation, Money Supply, and Central Bank Response – The September CPI month-over-month reading was 0.4%, coming in above the consensus gain of 0.2%. Year-over-year inflation fell from 8.3% to 8.2%, but was still higher than the 8.1% rate analysts were predicting. Is inflation finally peaking? Probably, but it will still remain elevated until the Fed consistently gets the growth of the money supply (M2) under control as that tends to be a leading indicator of inflation. The growth of M2 is starting to moderate, and it actually declined 0.6% in September, the largest drop for any month going back at least 60 years. This is a good sign, but the Fed is still behind the inflation curve which means more interest rate increases are on the horizon. The Fed raised the Federal Funds rate 0.25% in March, 0.5% in May, and 0.75% in June, July, September, and November (the largest increases since 1994). Based on Chair Powell’s recent comments, we should expect more rate increases in December and the months ahead, but likely not at the 0.75% clip from the previous four meetings.  The Fed Funds rate is now expected to finish the year well above 4.0%. We will continue to closely monitor monthly inflation readings and the Fed’s response as this will undoubtedly impact capital market returns and volatility in the months and years ahead.
(Source: Bloomberg)
  • GDP, Gross Domestic Income, Employment, and Consumer Confidence – Third quarter GDP came in at 2.6%, coming on the heels of negative growth rates for the first and second quarters.  Although the 3Q datum supports the view that we are probably not quite in a recession, it doesn’t mean that everything is rosy.  Most of the GDP growth was led by net exports which should not be as strong going forward. Clearly we are in a trend of slowing growth which could get worse especially if personal consumption, business investment, and home building continue to slow/decline going into 2023. We will continue to keep a close eye on growth figures going forward.
(Source: Bureau of Economic Analysis)
  • Corporate Profits – Corporate earnings have been rising in 2022, growing 6.1% in the second quarter.  However, there are signs that earnings are starting to fall. We will continue to keep a close eye on profitability going forward particularly given the impact of higher interest rates and potentially slowing consumer demand.    
  • Geopolitical Risks – It has become difficult to make sense of where things stand regarding the Russian/Ukrainian war, especially given the media’s conflicting reporting. What seems certain is that Russia is determined to continue course, especially after the bombing of the Crimean Bridge in early October. Putin has now sent an additional 80,000 soldiers into Ukraine with plans to train and send in 220,000 more. It remains impossible to say how long the conflict will last. Cleary Russia has ratcheted up its military operations to gain the offensive in the war. The Russian onslaught could pave the way for sooner negotiations with Ukraine; however, as long as Ukraine keeps receiving military support (including from the US), the conflict will likely drag on which will continue to impact the global economy and the capital markets.

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 two grandchildren.

Tim Schwarzenberger, CFA

Portfolio Manager

Tim Schwarzenberger, CFA is a Portfolio Manager with Inspire Investing and has over 17 years of experience. Tim previously served as the Managing Director at Christian Brothers Investment Services where he was responsible for implementing the firm’s overall investment philosophy through manager selection as well as strategy and product development.

National Admin Office: 3597 E Monarch Sky Ln, Suite 330 Meridian, ID 83646; Phone: (877) 859-6383 Investment advisory services offered through Inspire Advisors, LLC, a Registered Investment Advisor registered with the SEC.

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