Inspire Portfolio Strategy Insights

As of
June 30, 2024
Inspire Global Aggressive Portfolio
Inspire Global Conservative Portfolio
Inspire Global Equity Portfolio
Inspire Global Moderate Portfolio
Inspire Select Aggressive Portfolio
Inspire Select Conservative Portfolio
Inspire Select Equity Portfolio
Inspire Select Moderate Portfolio
This information is for internal use only.

Capital Market Returns

The equity markets posted mixed results in the second quarter of 2024, with growth stocks and emerging markets having a strong quarter while the small and mid-cap markets as well as the value stocks were mostly negative. The bond market was relatively quiet with mostly flat performance.   

The broad fixed income market (BB US Agg) returned 0.07% in the quarter as rates increased slightly across the maturity spectrum. The index is up 2.63% for the past year. 

The U.S. large cap market (S&P 500) increased 4.28% in the quarter and is up 24.56% in the past 12 months fueled mainly by NVIDIA.  Growth stocks continued their outperformance of value stocks this quarter (returning 8.33% versus -2.17%) and are ahead of value by over 20% for the last year driven by the strong performance of the mega-cap tech stocks. U.S. mid-cap stocks underperformed US large-cap, along with U.S. small cap stocks with both indexes down more than 3% for the quarter.  

International developed stocks underperformed their U.S. counterparts over the trailing three and twelve months from both a local and U.S. perspective. Emerging market stocks also underperformed for the quarter and have significantly underperformed most equity asset classes for the year primarily due to underperformance from China.  Mainland Chinese stocks declined 2.08% in the quarter and are down 8.76% over the past 12 months. Latin American stocks were down -12.20% for the quarter and are down -5.59% for the past year. The U.S. dollar (U.S. Dollar Index) increased 1.94% against most other currencies during the quarter.      

(Source: Bloomberg)
(Source: Bloomberg)

Global & Select Portfolios

Given the tilt to small and mid-cap stocks in our strategies, all the diversified portfolios posted negative returns for the quarter. The lower the allocation to equities, the better the relative performance.

All of our Select and Global (ETF-centric) strategies underperformed their secular benchmarks. The portfolios with a higher fixed income allocation posted stronger results given the higher relative performance of IBD versus the BB US Agg. For the trailing 12-month period, both our Select and Global strategies underperformed their respective benchmarks, although the Global strategies slightly outperformed the Select strategies.    

(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.)

All our asset class strategies underperformed their benchmarks in the quarter.  

Over the trailing twelve months, the International Developed sleeve slightly outperformed the secular benchmark. Our other sleeves (Large Cap, Mid Cap, and Small Cap and Emerging Markets), on the other hand, underperformed.    

(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.)

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

The US Small Cap sleeve underperformed the S&P 600 Index in the 2nd quarter, returning -3.68% versus -3.11% for the index. For the trailing one-year period, the sleeve has posted a return of 2.67% and underperformed its index which returned 8.66%. Weak performance in the quarter and year to date from the strategy’s Consumer Staples, Industrials, and Materials holdings were the main drivers of the underperformance. Although this is disappointing, we still believe that the quality of our small cap selection process will bear fruit when the market turns its attention to the broader markets and small and mid-cap stocks come into favor.

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

While the markets have been strong since November, we think that investors are overly optimistic. As a case in point, the S&P 500 has had over 335 days without a daily decline of 2% or more, which is the most since 2018.  We would not be surprised to see another correction in 2024, especially if the economy starts showing more signs of an impending recession or inflation remains higher than expected.    

Regardless of how the market performs in the coming 6-12 months, we believe our current long-term positioning is appropriate. We remain underweight U.S. large cap stocks, especially the mega-cap tech stocks that have driven most of the market this year and we believe are significantly overvalued. We are also overweight non-U.S. developed large-cap, US small-cap, and U.S. mid-cap equity. U.S. small cap in particular still seems attractive based on forward P/E valuations. On the fixed income side, we believe IBD’s current shorter duration posture relative to the BC Agg is appropriate.  For more information, please see the latest piece on Inspire’s risk and return assumptions and our long-term, strategic asset allocations.    

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 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.  

(Source: Bloomberg)

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. 

(Source: Bloomberg)

Corporate Profits

As we head into the last half of 2024, corporate profits have so far remained strong.  Currently, the market is expecting earnings to keep improving over the next several quarters.  We will continue to keep a close eye on corporate earnings as this will impact equity performance going into 2025.

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.

Information on this website does not involve the rendering of personalized investment advice but is limited to the dissemination of general information on products and services. A professional adviser should be consulted before implementing any of the options presented. The information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed.

The firm only transacts business in states where it is properly registered or is excluded or exempted from registration requirements. Registration as an investment advisor does not constitute an endorsement of the firm by securities regulators nor does it indicate that the advisor has attained a particular level of skill or ability.

Different types of investment involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client's investment portfolio. No client or prospective client should assume that any information presented and/or made available on this Website serves as the receipt of, or a substitute for, personalized individual advice from the adviser or any other investment professional.

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.

© Copyright - Inspire Advisors, LLC