Quarterly Review & Commentary
Quarter One · Two Thousand and Twenty Two
Prepared by Darrell W. Jayroe, CFA, CFP®, CKA®


Chief Investment Officer







For institutional use only
Economic Summary
Going forward, investors would be well served to ensure that their portfolios are properly balanced to help protect against the myriad of potential economic risks that are both seen and unseen.

In the first quarter of 2022, after a significant rebound from the Covid-19 downturn, the growth of the global economy showed signs of slowing. U.S. Real (inflation-adjusted) Gross Domestic Product (GDP) is estimated to have grown just 1.7% (annualized) in Q1 2022, down dramatically from its torrid 7.0% pace the prior quarter. While it was to be expected that the previous high level of economic growth could not be sustained, the slowdown is also attributable to other factors. Most notably, the Russian invasion of Ukraine has significantly disrupted commodities markets and already fragile supply chains. Coincident with the slowing U.S. economy, inflation jumped to levels not seen in decades as the Consumer Price Index (CPI) showed an increase of 7.9% over the prior twelve months as society grapples with the challenges of reopening after the pandemic lockdowns. 

However, it was not all bad news in the first quarter. For the first time in decades, workers find themselves with significant bargaining power given a very favorable labor market. The most recent (March) jobs report showed the unemployment rate dipping to 3.6%, close to its pre-pandemic reading of 3.5% (February 2020). Having lost 22 million jobs from the pandemic contraction, the workforce is still 1.6 million jobs below its February 2020 level. The labor force participation rate still languishes as US adults remove themselves from the workforce for a number of reasons.

Looking forward, the economic landscape seems more troubling than had been originally forecast. The tragic human and financial toll of the ongoing conflict in Eastern Europe will likely have repercussions for years to come. With shifting geopolitical power balances, the human and economic flourishing that comes from free trade and a rising consumer class will sadly be curtailed. Further, variants of the Covid-19 virus appear to be a source of concern for the foreseeable future.

Add to those risks, the dramatic rise in interest rates is cause for concern. The U.S. Federal Reserve and other global central banks are between the proverbial rock and a hard place. As the Federal Reserve seeks to battle against the rapid rise in inflation by increasing short-term rates and shrinking its balance sheet, at the same time, it must guard against potential monetary missteps that might increase the risk of a recession. Meanwhile, the national debt level balloons higher and higher.

Therefore, going forward, investors would be well served to ensure that their portfolios are properly balanced to help protect against the myriad of potential economic risks that are both seen and unseen. At the same time, however, courage is required to not miss out on the potential growth opportunities that come with a prudent long-term investing perspective.

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

In the first quarter, we saw the S&P 500 give up its recent leadership position to the international and emerging markets to start the quarter, even though all the markets returned negative numbers to start the year. The first quarter also ushered in the much anticipated, expected, and needed correction we had been waiting for in 2021. All the major markets breached the -10% correction threshold during the first quarter, and all found support and rallied to finish the quarter in the same negative neighborhood. With the Fed's anticipation of several interest rate increases this year and increased concerns over high inflation and a slowing economy, I wouldn’t be surprised to see a re-test of the -10% threshold in the next few weeks. We are in the “Correction Process,” which can take several months to complete the cycle. It is too early to say that the correction is over just because we have been down more than -10% already in 2022. However, this “Correction Process” doesn’t guarantee this will lead to a deep and protracted bear market.   

(Source: Bloomberg)

Now that 2021 is behind us and the long-anticipated correction arrived in the first quarter of 2022, we look forward to seeing what the rest of the year will bring. The past 12 months have been a volatile and emotional ride for all markets. From Covid vaccines being rolled out in the first half of 2021 and then the rise of both the Delta Variant and the Omicron Variant in the 4th quarter, to the fear of inflation early in 2021 and the pain of inflation during the last half of 2021. The pain of inflation only increased during the 1st quarter of 2022. Although the pain has been felt mostly by consumers at the gas pump and the grocery store, everything is more expensive now than when Biden took office more than a year ago. In the past 12 months, the S&P 500 had a total return of 15.63%, the S&P 400 Mid-Cap Index was up only 4.56%, and the S&P 600 Small-Cap Index was up a paltry 1.15%. The US markets won the trifecta against the international markets (again) that fell short of negative returns by the slimmest of margins with a return of only 0.61%. We still expect to see the international markets perform better than the US markets over the next 12 to 24 months as the global economy recovers from the lingering effects of the pandemic; but now, with the Russia-Ukraine War in full force, we expect the international bull market to be pushed out several months until hostilities cease and eastern Europe can recover. We still expect to see muted returns from the US markets; if we see positive numbers around the 5% to 6% level in 2022, we would not be disappointed.

(Source: Bloomberg)

Economic Indicators and Calendar

Inflation - CPI Month over Month Release Date & Time Period Survey Actual
CPI MoM 01/12/2022 08:30 Dec 0.40% 0.50%
CPI MoM 02/10/2022 08:30 Jan 0.40% 0.60%
CPI MoM 03/10/2022 08:30 Feb 0.80% 0.80%
CPI MoM 04/12/2022 08:30 Mar 1.20% 1.20%
CPI MoM 05/11/2022 08:30 Apr
CPI MoM 06/10/2022 08:30 May
CPI MoM 07/13/2022 08:30 Jun
CPI MoM 08/10/2022 08:30 Jul
CPI MoM 09/13/2022 08:30 Aug
CPI MoM 10/13/2022 08:30 Sep
CPI MoM 11/10/2022 08:30 Oct
CPI MoM 12/13/2022 08:30 Nov
CPI MoM 1/10/2023 08:30 Dec
(Source: Bloomberg)

The Federal Reserve finally began the journey of raising the Federal Funds rate and is expected to raise rates at each of the remaining six meetings this year to reign in the high inflation slowing down the economy and costing people more of their hard-earned money. After inflation hit the 0.90% number (Month-over-Month) in November, we got a slight reprieve when the December number came out as a relatively tame 0.50%. The respite was short-lived as the MoM number for January reversed course and increased to 0.60%. The momentum continued into February with a monthly tick of 0.80%, in line with expectations. The April expectations were for one of the largest Month-over-Month numbers we have seen in a long time of 1.20%, and it came in as expected on April 12th. It is uncertain when we will get back to the normal historical range of 0.10% to 0.20% MoM. We can hope to see the trend heading toward that area before the end of 2022.  

Economic Growth Release Date & Time Period Survey Actual
GDP Price Index 01/27/2022 08:30 4Q A 6.1% 6.9%
GDP Price Index 02/24/2022 08:30 4Q S 6.9% 7.1%
GDP Price Index 03/30/2022 08:30 4Q T 7.1% 7.1%
GDP Price Index 04/28/2022 08:30 1Q A 1.7%
GDP Price Index 05/26/2022 08:30 1Q S
GDP Price Index 06/29/2022 08:30 1Q T
GDP Price Index 07/28/2022 08:30 2Q A
GDP Price Index 08/25/2022 08:30 2Q S
GDP Price Index 09/29/2022 08:30 2Q T
GDP Price Index 10/27/2022 08:30 3Q A
GDP Price Index 11/30/2022 08:30 3Q S
GDP Price Index 12/22/2022 08:30 3Q T
(Source: Bloomberg)  (A= Advance; S= Second: T= Third)

GDP growth grew stronger than the expected 6.1% for the 4th Quarter, with an Advance number of 6.9% and the final adjusted 3rd print of 7.1%. Expectations for the 1st Quarter of 2022 have fallen off the proverbial cliff to a paltry 1.7% due to inflation being hotter than expected in the previous quarter from the probability of several interest rate increases coming from the Federal Reserve, and the global economic slowdown due to the war raging between Russia and Ukraine. Although we still see the potential for solid growth for the US economy through 2022 and into 2023, the headwinds mentioned above will probably keep the growth muted in the 2nd quarter and possibly into Q3.

Labor Market Release Date & Time Period Survey Actual Revised
Unemployment Rate 1/7/2022 8:30 Dec 4.1% 3.9%
Unemployment Rate 2/5/2022 8:30 Jan 3.9% 4.0%
Unemployment Rate 3/4/2022 8:30 Feb 3.9% 3.8%
Unemployment Rate 4/1/2022 8:30 Mar 3.7% 3.6%
Unemployment Rate 5/6/2022 8:30 Apr
Unemployment Rate 6/3/2022 8:30 May
Unemployment Rate 7/8/2022 8:30 Jun
Unemployment Rate 8/5/2022 8:30 Jul
Unemployment Rate 9/2/2022 8:30 Aug
Unemployment Rate 10/7/2022 8:30 Sep
Unemployment Rate 11/4/2022 8:30 Oct
Unemployment Rate 12/2/2022 8:30 Nov
Nonfarm Payrolls (Change) 1/7/2022 8:30 Dec 444k 199k 647k
Nonfarm Payrolls (Change) 2/5/2022 8:30 Jan 51k 467k 588k
Nonfarm Payrolls (Change) 3/4/2022 8:30 Feb 424k 678k 504k
Nonfarm Payrolls (Change) 4/1/2022 8:30 Mar 469k 431k 750k
Nonfarm Payrolls (Change) 5/6/2022 8:30 Apr
Nonfarm Payrolls (Change) 6/3/2022 8:30 May
Nonfarm Payrolls (Change) 7/8/2022 8:30 Jun
Nonfarm Payrolls (Change) 8/5/2022 8:30 Jul
Nonfarm Payrolls (Change) 9/2/2022 8:30 Aug
Nonfarm Payrolls (Change) 10/7/2022 8:30 Sep
Nonfarm Payrolls (Change) 11/4/2022 8:30 Oct
Nonfarm Payrolls (Change) 12/2/2022 8:30 Nov
(Source: Bloomberg)

The Unemployment rate has continued falling month-over-month for the past year and currently sits at a point where any additional improvement will be more difficult. It is possible to fall to the pre-pandemic low of 3.5%, but getting below that number is not expected. Nonfarm Payrolls continue to have strong monthly numbers, but a good portion of these new payroll numbers may be coming from people switching jobs for better pay and benefits in this competitive job market, with still more than 7 million job openings in the US.

Meeting Date Rate Decision (%) For Against Revised
FOMC Meeting 01/26/2022 .00-.25 9 0
FOMC Meeting 03/16/2022 .25-.50 8 1
FOMC Meeting 05/04/2022
FOMC Meeting 06/15/2022
FOMC Meeting 07/27/2022
FOMC Meeting 09/21/2022
FOMC Meeting 11/02/2022
FOMC Meeting 12/14/2022
Unemployment Rate 9/2/2022 8:30 Aug
Unemployment Rate 10/7/2022 8:30 Sep
Unemployment Rate 11/4/2022 8:30 Oct
Unemployment Rate 12/2/2022 8:30 Nov
Nonfarm Payrolls (Change) 1/7/2022 8:30 Dec 444k 199k 647k
Nonfarm Payrolls (Change) 2/5/2022 8:30 Jan 51k 467k 588k
Nonfarm Payrolls (Change) 3/4/2022 8:30 Feb 424k 678k 504k
Nonfarm Payrolls (Change) 4/1/2022 8:30 Mar 469k 431k 750k
Nonfarm Payrolls (Change) 5/6/2022 8:30 Apr
Nonfarm Payrolls (Change) 6/3/2022 8:30 May
Nonfarm Payrolls (Change) 7/8/2022 8:30 Jun
Nonfarm Payrolls (Change) 8/5/2022 8:30 Jul
Nonfarm Payrolls (Change) 9/2/2022 8:30 Aug
Nonfarm Payrolls (Change) 10/7/2022 8:30 Sep
Nonfarm Payrolls (Change) 11/4/2022 8:30 Oct
Nonfarm Payrolls (Change) 12/2/2022 8:30 Nov
(Source: Bloomberg)

The Federal Reserve had no change to their guidance on interest rates in their first meeting of the year but clearly telegraphed that the interest rate increases would get started at their March meeting. Now that this expectation has been met, the Fed is sending signals to the market that we should expect them to ratchet up interest rates at all six of their remaining meetings this year. There are also expectations that some of these interest movements will be at the 50 bps level, and not all will be for 25 bps. The other information coming out of the Fed is its plan to reduce its balance sheet by $95 -$100 billion per month by letting securities mature and not reinvesting the proceeds. They may need to sell some of their holdings to meet the reduction goal, which will add to the fixed-income market volatility for the remainder of 2022.

Inspire 100 ESG ETF [NYSE: BIBL]

The US large-cap markets kept the leadership position in Q1 relative to the US small-cap and US midcap markets and finished the quarter outperforming them slightly so far this year. With the large-cap stocks amid the correction we have been expecting and warning about, a slowing economy, inflation still running hotter than previously expected, and a Federal Reserve that is telegraphing the potential of 7-8 interest rate increases in the coming months, this correction process may last for several months. Even with these headwinds, a key to a good asset allocation is US large cap exposure as a core position. 

The Inspire 100 ETF (NYSE: BIBL) ended the first quarter of 2022 with a small rally but still turned in negative performance of -8.23% and trailing the S&P 500 TR Index which returned -4.60%.  

Keep in mind that BIBL holds only 100 positions versus the 500 in the S&P 500 and does not hold any of the largest mega-cap stocks that get most of the attention from the financial media, commonly referred to as the FAANG stocks (Facebook, Apple, Amazon, Netflix, and Google). Due to high inflation, rising interest rates, and slower growth expectations this year, we expect the large-cap growth stocks to fall out of favor in 2022, and this presents a strong case for BIBL to be considered as an alternative to the S&P 500 as the core US large-cap position in any diversified asset allocation plan. The 100 BIBL stocks are on the smaller side of the large-cap market cap spectrum and are squarely in the core area with a mix of both value and growth stocks.

(Source: inspireetf.com & Bloomberg)

Growth of $10,000 USD Since Inception

Ending Value $18,007.90

Performance

Fund 3 month 6 month 1 year 3 year YTD Since 10/30/2017
Inspire IOO   ESG ETF - NAV -8.43% 0.27% 9.74% 17.24% -8.43% 14.27%
Inspire IOO   ESG ETF - Market -8.23% 0.27% 9.68% 17.21% -8.23% 14.30%
Inspire 100   Index -8.40% 0.18% 10.37% 18.45% -8.40% 15.32%
S&P 500   Index - Total Return -4.60% 5.91% 15.63% 18.89% -4.60% 15.71%
Performance data as of
3/31/2022
. 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 ESG ETF [NYSE: BLES]

The international developed markets, emerging markets, and the US large-cap markets bounced off the lows we saw in the 1st quarter on March 8th.  However, this mini-rally for the last three weeks of the quarter was not enough to overcome the negative momentum we have seen so far in 2022, and all markets finished the quarter in negative territory. In the first quarter, the Inspire Global Hope ESG ETF (NYSE: BLES) turned in performance of -4.98%, underperforming the S&P Global 1200 TR Index slightly with a return of -4.71%. It is most likely that this underperformance is because BLES is equally weighted while the Index is market-cap-weighted, as well as the fact that the US large-cap exposure in BLES does not hold any of the mega-cap stocks that are a part of almost every mutual fund and ETF, which drove the US large-cap portion of the index in the 1st quarter.

We believe that the tilt to the smaller end of the large-cap spectrum of BLES will come back into favor as the economic recovery continues at a slower pace due to high inflation and rising interest rates. These factors are also likely to cause the mega-cap growth stocks to pull back in the next quarter. BLES remains a solid global foundation in a long-term diversified asset allocation plan.

(Source: inspireetf.com & Bloomberg)

Growth of $10,000 USD Since Inception

Ending Value $17,223.97

Performance

Fund 3 month 1 year 3 year 5 year YTD Since 2/27/2017
Inspire   Global Hope ESG ETF - NAV -4.62% 9.00% 14.14% 11.16% -4.62% 11.30%
Inspire   Global Hope ESG ETF - Market -4.98% 8.57% 14.06% 11.05% -4.98% 11.29%
Inspire   Global Hope Large Cap Eq Wgt Index -3.91% 12.03% 15.36% 12.21% -3.91% 12.39%
S&P   Global 1200 - Total Return -4.71% 9.97% 15.17% 12.80% -4.71% 12.83%
Performance data as of
3/31/2022
. 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 Faithward Large Cap Momentum ESG ETF [NYSE: FEVR]

While Q1 2022 was volatile, with FEVR -6.44%, the Momentum benchmark (MTUM) -7.24%, and the broad S&P 500 down -4.60%, market participants were relieved that losses were not more pronounced. The Ukrainian/Russian war, a hawkish FED, record inflation, and financially strained consumers were all setups for the market to go further south. Several tech companies that were previously growth engines declined dramatically as valuations were repriced. Now, the challenge is finding what companies have the resources and creative people to create growth, and our FEVRR process should discover those opportunities. — Matt Melott, Manager        

(source: inspireetf.com & Bloomberg)

Growth of $10,000 USD Since Inception

Ending Value $11,017.90

Performance

3 month 6 month 1 year YTD Since 12/7/2020
Inspire Faithward Large Cap Momentum ESG ETF - NAV -6.51% -2.46% 9.96% -6.51% 7.54%
Inspire Faithward Large Cap Momentum ESG ETF Market -6.44% -2.45% 9.96% -6.44% 7.67%
S&P 500 Index - Total Return -4.60% 5.91% 15.63% -4.60% 18.53%
Performance data as of
3/31/2022
. 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 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 1.09%. 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 Faithward Mid Cap Momentum ESG ETF [NYSE: GLRY]

Q1 2022 was challenging for GLRY, which was down -16.28% on market price and -16.29% on the NAV relative to -7.24% in the Momentum benchmark (MTUM) and -4.89% S&P 400 Midcap Index. While the large, broad market saw a difficult quarter, GLRY and other midcap funds were allocated to smaller, consumer-driven companies. Prices rose at record levels, and these brands could not pass those costs to consumers and maintain top-line revenue, which led to lower stock prices and lower fund performance.  Though Q1 was a challenging quarter, we remain committed to our FEVRR process and finding mid-sized opportunities with high reward potential. — Matt Melott, Manager

(source: inspireetf.com & Bloomberg)

Growth of $10,000 USD Since Inception

Ending Value $10,240.41

Performance

Fund 3 month 6 month 1 year YTD Since   12/7/2020
Inspire   Faithward Mid Cap Momentum ESG ETF - NAV -16.29% -13.34% -11.56% -16.29% 1.82%
Inspire   Faithward Mid Cap Momentum ESG ETF - Market -16.28% -13.39% -12.12% -16.28% 1.85%
S&P 400 Index - Total Return -4.89% 2.70% 4.56% -4.89% 16.72%
Performance data as of
3/31/2022
. 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 ESG ETF [NYSE: ISMD]

Although the SMALL CAP AND MID CAP MARKETS continued to underperform the US large-cap market during the 1st quarter, we still believe that the opportunities for the smaller side of the market cap spectrum will come back into favor as growth prospects slow for the large-cap stocks into 2022 after leading the pack in much of 2021.

The Inspire Small/Mid Cap ESG ETF (NYSE: ISMD) was down in the 1st quarter with a return of -5.53% after finding support on January 27th just as it touched the “Correction Line” at -10.16% YTD; but still underperformed the S&P 600 Equal-Weight TR Index which had a return of -4.29%. This slight underperformance is most likely attributed to ISMD holding both small and mid-cap stocks.

When it comes to holding small and mid-cap stocks in a diversified asset allocation, we believe patience will prove advantageous as the market rotates out of the large-cap growth stock leaders and into the bargains available in the smaller companies for the remainder of 2022 and into 2023.

(Source: inspireetf.com & Bloomberg)

Growth of $10,000 USD Since Inception

Ending Value $15,723.03

Performance

Fund 3 month 1 year 3 year 5 year YTD Since 2/27/2017
Inspire Small/Mid Cap ESG ETF - NAV -4.98% 3.26% 12.37% 9.86% -4.98% 9.32%
Inspire Small/Mid Cap ESG ETF - Market -5.53% 2.39% 12.39% 9.70% -5.53% 9.31%
Inspire Small/Mid Cap Impact Eq Wgt Index -4.56% 5.97% 15.57% 11.88% -4.56% 11.37%
S&P SmallCap 600 Eq Wgt Index - Total Return -4.29% 2.04% 15.90% 11.75% -4.29% 11.16%
Performance data as of
3/31/2022
. 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 ESG ETF [NYSE: RISN]

THE INSPIRE TACTICAL BALANCED ESG ETF (NYSE: RISN) RETURNED -10.98% in the 1st Quarter and 9.81% (annualized) since inception on July 15th, 2020. This underperformed the S&P Target Risk Moderate TR Index benchmark for the quarter, which returned -5.54%, but outperformed the index since the fund's inception, which produced a return of 5.27% (annualized) over the same period since 7/15/2020.

We attribute this underperformance for the quarter to our positioning the fund in a conservative allocation with regards to the stock market at the end of January and consequently not capturing the rebound that happened between March 14th and March 29th in the Inspire 100 US stock index. We also reduced the duration of our treasury holding too slowly, which added to our negative returns for the quarter.  

The first adjustment that we made to the allocation of the fund (RISN) this quarter was to reduce the allocation to stocks from an 80% allocation at the beginning of the quarter to a 20% allocation after the stock market turned into a down-trending position at the end of January.

The second adjustment that we made to the allocation was to adjust the duration of the U.S. treasury holdings down from long-term and intermediate-term treasuries to short-term treasuries to limit our interest rate exposure in the middle of February.

The third adjustment made to the fund's allocation was increasing our gold allocation to 20%. This was to take advantage of future rises in inflation and protect against continued downturns in the U.S. stock and treasury markets.

The fourth and final adjustment that we made to the fund’s allocation was to add a small allocation to diversified commodities in March. This decision may have come a little too late as the run up in commodities had been somewhat extended and only caught the tail end before it began to retrace.

We will continue to monitor this allocation to see if it warrants moving back into stocks should the trend reverse or hold our conservative allocation for a longer period.

Jacob Chandler, Manager

(source: inspireetf.com & Bloomberg)

Growth of $10,000 USD Since Inception

Ending Value $11,721.08

Performance

Fund 3 month 6 month 1 year YTD Since 7/15/2020
Inspire Tactical Balanced ESG ETF - NAV -10.73% -3.73% 4.06% -10.73% 9.71%
Inspire Tactical Balanced ESG ETF - Market -10.98% -3.79% 3.93% -10.98% 9.81%
S&P Target Risk Moderate Index - Total Return -5.54% -2.92% 0.38% -5.54% 5.27%
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 ESG ETF [NYSE: WWJD]

THE INSPIRE INTERNATIONAL ESG ETF (NYSE: WWJD) was down -4.86% in the 1st quarter, slightly outperforming the S&P International 700 TR Index return of -4.92%; an outperformance of 6 basis points. For the past 12 months, WWJD has outperformed the S&P International 700 TR 4.73% to 0.61%, respectively.

This strong outperformance is likely due to several factors:  1) WWJD is equally weighted, and the index is market cap-weighted.  2) Selection most likely also played a role in the out-performance, with WWJD having roughly 200 positions vs. the index with 700 positions. 3) The geographic selection for WWJD has also been positive to performance returns by not having any exposure to China or Russia in the emerging markets allocation.

(Source: inspireetf.com & Bloomberg)

Growth of $10,000 USD Since Inception

Ending Value $13,949.43

Performance

Fund 3 month 6 month 1 year YTD Since 9/30/2019
Inspire International ESG ETF - NAV -4.41% -1.40% 5.18% -4.41% 14.42%
Inspire International ESG ETF - Market -4.86% -1.28% 4.73% -4.86% 14.28%
Inspire Global Hope Ex US GTR -3.74% -1.05% 5.30% -3.74% 12.40%
S&P International 700 - Total Return -4.92% -2.25% 0.61% -4.92% 9.78%
Performance data as of
3/31/2022
. 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

THE YIELD CURVE FLATTENS  -  The flattening in the yield curve that we saw during the 4th  quarter accelerated during the 1st quarter, with the most dramatic increase on the short end of the curve. The pivot point remained at the 10-year point as every maturity shorter jumped dramatically during the quarter. Interest rates from 1 month to 30 years all went up in the 1st quarter due to the Federal Reserve raising interest rates for the first time since December of 2018, with a high probability of an interest rate increase at each of their next six meetings this year. Some of these increases will probably be at least 50 bps, but we will unlikely see a 100 bps rate increase at any of the meetings in 2022.

As of the end of the 1st quarter, the 1-year US Treasury yield increased 122-bps from 0.383% to 1.607% versus the 10-year US Treasury which rose 83-bps from 1.512% to 2.341%. Analysts that were expecting the 10-year rate to hit 2% before the end of 2021 were wrong about the timing but right on the level being breached.

The 2-year U.S. Treasury yield increased from 0.734% to 2.337%, the 5-year yield rose from 1.264% to 2.462%, and the 30-year treasury rose from 1.904% to finish the quarter at 2.45%.

Everyone is talking about the yield curve Inversion and the coming recession that could follow. When people talk about the “Yield Curve Inverting” they are almost always talking about the 2-year Treasury yield being higher than the 10-year Treasury yield. As of the end of the 3rd quarter, the yield curve was less than one bps point away from the “inversion point,” with the 2-year at 2.337% and the 10-year at 2.341%.  If the 2-year and 10-year do “invert” in the coming quarter, that doesn’t guarantee a recession immediately or even guarantee a recession at all. Other variables are needed for a recession, and those do not seem to be in the calculus at this time (i.e., bloated inventories and falling demand).  

Source: Bloomberg 03-31-2022
Inspire Corporate Bond ESG ETF [NYSE: IBD]

THE INSPIRE CORPORATE BOND ESG ETF (NYSE: IBD) was down -5.04% in the 1st quarter, slightly outperforming the fixed income benchmark of the Bloomberg Barclays US Intermediate Credit Index, which was down -5.07%. This negative performance is attributed to the shift in the yield curve, as all maturities from 1 month to 30 years rose dramatically, giving us the flattest yield curve in several years.

The shift in the yield curve caused negative performance for the bond market in the 1st quarter. It appears that the Federal Reserve is prepared to raise interest rates at least 6 to 7 more times in 2022, which could cause an upward shift in the yield curve in a parallel fashion with each rate increase but should remain flat with a low probability of a steep inversion. If the economic growth continues to slow, as we are expecting, and the current correction in the equity markets continues for an extended period, we would expect a “flight to quality,” causing bond prices to rise and yields to fall with the potential of offsetting some of the effects of the Federal Reserve actions.

Bonds are an important part of a diversified portfolio, even in a rising rate environment.  The reason is that bonds have much less volatility than stocks and therefore provide a hedge (protection) against equity market weakness. We saw this in January and February of this year. Even though bond returns were negative as interest rates rose, they still weren’t as negative as stocks. Also, as rates go up, investors can reinvest at those higher yields, thus offsetting price declines from rising rates. It is important to consider how long your time horizon is for investing. If you are a long-term investor with a time horizon longer than the portfolio’s duration, a rise in rates will create short-term pain as rates rise, but your total return will be positive over the long term. Many bonds are now trading below par value, and if held to maturity, their total return will be positive.      

(Source: inspireetf.com & Bloomberg)

Growth of $10,000 USD Since Inception

Ending Value $10,650.36

Performance

Fund 3 month 6 month 1 year 3 year YTD Since 7/10/2017
Inspire Corporate Bond ESG ETF - NAV -5.18% -6.01% -4.50% 0.96% -5.18% 1.32%
Inspire Corporate Bond ESG ETF - Market -5.04% -6.02% -4.53% 0.78% -5.04% 1.34%
Inspire Corporate Bond Impact Eq Wgt Index -5.14% -5.94% -4.32% 3.00% -5.14% 2.97%
Bloomberg Barclays U.S. Intermediate Credit Index Total Return -5.07% -5.59% -4.05% 2.10% -5.07% 2.32%
Performance data as of
3/31/2022
. 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

Geopolitical Risks and Volatility

With the Russian/Ukrainian war entering the six-week mark, it remains unclear how long the conflict will last or how it will end. The Ukrainian response has been strong. However, Putin’s resolve is also strong, and with a high approval rating and a distinct military advantage, he will not be giving up anytime soon until his demands are met. Up to this point, economic sanctions have not been universally implemented against Russia. Still, as charges of Russian atrocities pile up, it seems that governments are becoming more willing to increase their pressure. If that’s the case, or if more countries get directly involved in the conflict and it continues to drag on, there will likely be more negative impacts on the global economy and the markets. With so much geopolitical uncertainty, what seems certain is that volatility (in both directions) will remain elevated in the coming weeks and months.

Inflation, Employment, and the Federal Reserve

The March CPI numbers remained elevated with a month-over-month reading of 1.20%. Over the past 12 months inflation hit 8.5%, which is the fastest annual pace since 1982 (Bureau of Labor Statistics). The US job market continues to show improvement with lower readings on initial and continuing jobless claims, and unemployment fell to 3.6% in March, essentially matching the pre-pandemic low of 3.5%. With elevated inflation and strong employment, the Fed has indicated it will focus on curtailing inflation, even amid geopolitical turmoil. It raised the Federal Funds rate by 0.25% in March, and the market is anticipating the rate to reach 2%+ by December. In addition, the Fed communicated that it would start Quantitative Tightening in May by selling $95 billion worth of its $8.9 trillion balance sheet per month. We will continue to monitor monthly inflation readings closely, and the Fed’s response as this will undoubtedly impact capital market returns and volatility in the months and years ahead.

Yield Curve, the Consumer, and GDP

Many market observers became concerned at the end of March as the yield curve inverted (as measured by the difference between the yields on the 10 and 2-year Treasury notes). An inverted yield curve in the past has been an indicator of a possible recession on the horizon. With consumer spending and GDP growth still very strong, a recession does not seem imminent, at least in the US. However, risks have increased given inflationary and geo-political risks, and we will be closely monitoring consumer confidence, spending, and GDP growth in the months ahead.   

Corporate Profits

Much of the strong equity results in 2021 were driven by remarkable corporate profitability (the S&P 500 profits rose 45%, an all-time high). We don’t expect to see such a rise in profits in 2022 and therefore expect more muted or even negative returns. We are watching corporate profits very closely and should get a better read on this in the coming weeks as more companies report their quarterly earnings.

Closing Remarks

The markets have finally entered the much-expected correction process and finished the quarter with negative performance even after bouncing off the “correction threshold” support level.  We believe that markets can’t go down forever, and this “Correction Process” may have several more months to run before we get the next upward leg of the current bull market. We have several known headwinds that we are facing this year – inflation, rising interest rates, War in Ukraine, and slower economic growth but we need to remain calm as we don’t know what unknown headwinds we will face or what tailwinds may take us by surprise in 2022. Whatever may come, our Lord is in control. We remain thankful for the provision, protection, and blessings that we received from our Heavenly Father and are looking expectantly to what God has in store for the remainder of 2022.

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

Darrell W. Jayroe, CFA, CFP®, CKA®
Chief Investment Officer
Darrell Jayroe, CFA, CFP, CKA, serves as Inspire’s Chief Investment Officer 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.
There is no guarantee that the Funds will achieve their objective, generate positive returns, or avoid losses. Before investing, consider the funds’ investment objectives, risks, charges and expenses. To obtain a prospectus which contains this and other information, call 877.658.9473, or visit www.inspireetf.com. Read it carefully. The Inspire ETFs are distributed by Foreside Financial Services LLC., Member FINRA. 

Inspire and Foreside Financial Services LLC are not affiliated. 

ETF shares are not redeemable with the issuing fund other than in large Creation Unit aggregations. Instead, investors must buy or sell ETF Shares in the secondary market with the assistance of a stockbroker. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling. The NAV of the Fund’s shares is calculated each day the national securities exchanges are open for trading as of the close of regular trading on the New York Stock Exchange (“NYSE”), normally 4:00 p.m. Eastern time (the “NAV Calculation Time”). Shares are bought and sold at market price (closing price) not NAV. Market Price returns are based upon the official closing price on the listing exchange (NYSE ARCA) at 4:00 p.m. ET when NAV is normally determined for most Inspire Funds, and do not represent the returns you would receive if you traded shares at other times.

An active secondary market for the Fund’s shares may not exist. Although the Fund’s shares will be listed on an exchange, subject to notice of issuance, it is possible that an active trading market may not develop or be maintained. There is no guarantee that distributions will be paid. 

Investment advisory services offered through Inspire Investing, LLC, a Registered Investment Advisor with the SEC. 

National Admin Office: 3597 E Monarch Sky Ln, Suite 330 Meridian, ID 83646; Phone: (877)658-9473; Email: admin@inspireinvesting.com 

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