The second quarter started out with a swift correction across U.S. and global markets during the first week, but they quickly found support and rallied for the remainder of the quarter. The international markets continued to outperform the U.S. markets as they did in the first quarter as investors’ optimism about the economic recovery in the U.S. remained weak as well as fear of a negative GDP number for the quarter as the effect of Trump’s tariffs on the U.S. and the global economies is realized. The S&P 600 Small Cap index, the S&P 400 Mid Cap Index and the S&P 500 Index all ended the quarter with good returns of 4.9%, 6.71% and 10.94% respectively, while the S&P International 700 index posted the strongest return of 12.49%.

Economic Indicators and Calendars

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Inflation came in at 0.20% (Month over Month) in April, exceeding expectations of a 0.30% increase. The estimate for the month-over-month number in May was for an increase of 0.20% and came in lower than expected at only 0.10%. The forecast for June was for a month-over-month increase of 0.30% and met that forecast at 0.30% when it was released on July 15th. It is likely we will continue to see month-over-month numbers fall or stay in the 0.0% to 0.20% territory for the next several months so that the CPI year-over-year number can move towards the 2% level over the next 12 months unless tariff wars move prices higher.

(Source: Bloomberg) (A= Advance; S= Second: T= Third)

GDP growth came in lower than the initial expectation of -0.2% for the first quarter, with an actual -0.3% growth rate for the quarter in the Advance Release. The expectation was revised to -0.4% for the Second Release and beat that expectation at -0.2%. The Third revision maintained the expectation of -0.2%, but the actual print came in much weaker than expected when it was released at -0.5%. The debate among economists and market pundits during the past quarter has been focused on when the Fed will make their next move to lower interest rates to avoid a recession due to a weaking economy.  

The yield curve is no longer inverted but there is now a fear of a recession brought on by a slowing labor market, slower consumer spending, and uncertainty over Trump administration policies and their effect on the U.S. consumer. Recessions are usually declared after an inversion corrects, so this would not be surprising.

(Source: Bloomberg)

The Unemployment Rate remained at 4.2% in April and May before falling back to 4.1% in June. It was expected that the Unemployment Rate would rise to 4.3% in June due to the increase in layoffs in the government workforce and a slowing job market but actually fell to 4.1% to end the quarter. Although we are still above the 4% level, it is possible we could see the Unemployment Rate return to its upward path for the final six months of 2025 if the economy slows and layoffs increase as a consequence of the Trump tariff policies.  

Nonfarm Payrolls had a surprisingly strong showing with April coming in at 177k new jobs, which was above the estimate of 132k. The new job numbers weakened in May by coming in at 139k jobs versus the expectation of 132k. There was a nice rebound in the job numbers for June with 147k new jobs, which was much stronger than the expected 108k job growth. Although the job market is showing signs of slowing over the past few months, it is possible the recession that several are predicting may be averted.

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(Source: Bloomberg)

The Federal Open Market Committee maintained their “pause” on cutting the Federal Funds rates during the two meetings of the second quarter. Based on Chair Powell’s recent comments, we should not be surprised if the “pause” in rate cuts coming from the FOMC remains in place for the next several months and will be dependent on the data which is showing a slowing but resilient economy. Although many analysts fully expect the rate cut cycle to continue in 2025, a few economists are saying there will be no interest rate cuts in 2025 if inflation starts to rise. The current expectation is for the terminal rate to be in the 3.5% range by late-2026 or mid-2027 due to ongoing inflationary concerns. The Federal Reserve has faced a challenging balancing act throughout 2025. While a cooling labor market would typically justify rate cuts, concerns about inflation driven by rising tariffs have kept the Fed on pause. Instead of easing policy, the Fed has maintained its current stance, waiting for clearer data on both inflation and broader economic conditions before making its next move.

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• BLES underperformed the S&P Global 1200 index during the second quarter with a total return of 9.08% vs 11.43% for the global index.  
• With strong performance in the international markets in relation to the U.S. Large Cap market during the second quarter, BLES was highly correlated with the global index.
• The underperformance of BLES to the global index was due to the weak performance of the U.S. large-cap part of the index during the quarter.  
• We believe that the tilt to the smaller end of the large cap spectrum of BLES will continue to be in favor as it is possible that the global economic numbers remain strong over the next six to 12 months.

Source: Bloomberg

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. 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.

• FDLS continued the strong rally from the start of the year and outpaced the global market, as measured by the MSCI All Country World ETF, by 166 bps with returns of 13.11% and 11.45% respectively for the quarter.
• We continue to believe that the globally diversified allocation of FDLS to U.S. 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 bull market continues its upward momentum over the next 12 to 24 months.

Source: Bloomberg

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. 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.

• GLRY continued to show strong ‘momentum’ that started in the last quarter to outpace the broad U.S. mid-cap market with a strong rally in the second quarter.
• GLRY outperformed the S&P 400 Midcap Index in the second quarter with a return of 14.16% vs the index that ended the quarter with a return of only 6.71%.
• The second quarter was up after a short-lived downdraft during the first week of May as the rally in momentum stocks accelerated through June.  
• Although the momentum factor appears to be back in favor, it can wane in the coming months if the economy shows signs of slowing. However, the methodology will not change as we will continue to look for great companies that have strong financial health and sustainable earnings, which lets them make strategic decisions in a similar or lower rate environment. We will find companies that have attractive valuations and price momentum, which assists with entry and exit points.

Source: Bloomberg

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. 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.

• ISMD performed in line with the S&P Small Cap 600 Index while lagging the S&P Midcap 400 Index for the second quarter with a slight underperformance of 4.48% vs the small-cap index at 4.90% as well as underperforming the S&P 400 Mid Cap index that was up 6.71%.
• The mid-cap market and the U.S. small-cap market rallied in the second quarter but fell short of regaining their leadership position that they enjoyed in the third quarter of 2024.
• The equal weighting of the 500 stocks in ISMD performed in line with the blend of the market cap-weighted small- and mid-cap indexes showing that the correlation between the small- and mid-cap markets and ISMD remains strong.
• We believe that the rotation to the broader market is showing higher probability for 2025, and this should benefit ISMD as the U.S. large-cap and mega-cap stocks are falling behind as investors appear to be expanding their appetite for smaller stocks.

Source: Bloomberg

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. 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.

• PTL outperformed the S&P 500 Index by 103 bps with returns of 11.97% and 10.94% respectively for the second quarter.  
• The continued outperformance of PTL to the S&P 500 index is due to weak performance in the Mega Cap Growth stocks, commonly referred to as Mag 7, vs. the broader large cap market.
• The exposure to smaller large-cap companies in PTL as the mega-cap growth stocks in the Communications Services and Technology sectors of the S&P 500 failed to regain their leadership position helped PTL shine.
• We believe as the bull market continues the upward momentum it showed in the quarter, PTL is well positioned to outperform the S&P 500 due to the tilt to the smaller side of the large market cap spectrum as well as its strong core positioning benefiting from both value and growth exposure.

Source: Bloomberg

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. 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.

• Performance Overview:
  The Inspire Tactical Balanced ETF (NYSE: RISN) returned 6.29% for the quarter, bringing its annualized performance to 5.98% since inception on July 15, 2020. RISN slightly outperformed its benchmark this quarter— as the S&P Target Risk Moderate TR Index posted a 5.35% return. This outperformance was largely driven by the continued market pullback experienced in early 2025.
• Capital Appreciation Sleeve: For most of the quarter, RISN maintained an 80% equity allocation. Our equity strategy continues to focus on U.S. companies that score highly on the Inspire Impact Score. These biblically aligned businesses are primarily mid- to large-cap companies with strong fundamentals, including consistent revenue and profit growth, low debt levels, and attractive or fair valuations.
• We made an adjustment to the stocks held within our allocation to more closely align with our filtering metrics. This will happen periodically to ensure that the stocks we are holding are keeping with our fundamental and moral filtering process.
• Principal Preservation Sleeve: The remaining 20% of the portfolio is allocated to short-term, floating-rate U.S. government bonds. This allocation serves as a defensive buffer in the current interest rate environment. We continue to evaluate a potential transition into standard short-term or even intermediate-term government bonds, but for now, our floating-rate position has proven effective and will remain in place until short-term rates begin to trend downward.
• We are also monitoring gold as a potential addition to our principal preservation sleeve. While current prices remain elevated, a meaningful correction could present a compelling buying opportunity in the future.
• Looking Ahead: Our current allocation remains at 80% equities/20% fixed income, but we are actively evaluating opportunities to shift back to a 70/30 mix as the market becomes potentially overpriced. Our long-term objective remains clear: to preserve principal and grow capital over time while staying aligned with biblical values.

Source: Bloomberg

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. 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.

• WWJD was up 13.25% in the second quarter, outperforming the S&P International 700 TR Index return of 12.49%, a difference of 76 basis points.  
• Being highly correlated with the index during the quarter, it 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 outperformance of WWJD in the coming year as it is equally weighted, and the index is market cap weighted.

Source: Bloomberg

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. 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.

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.

• IBD was up 2.06% in the second quarter, slightly underperforming the fixed income benchmark of the Bloomberg Barclays U.S. Intermediate Corporate Index, which was up 2.12%.  
• The decline in the yield curve on the short to intermediate side brought positive performance for intermediate bonds in the second quarter, which benefited IBD nicely vs longer term fixed income funds.
• With the Federal Reserve having paused their process of lowering interest rates so far in 2025, the yield curve steepened dramatically due to the slowing economy and the potential of inflation coming back, which is often referred to as ‘stagflation.’ We are now expecting the FOMC to maintain the pause in rate reductions in the coming months as they are concerned about reigniting inflation.

Source: Bloomberg

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. 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.

1. Inflation and Central Bank Response

The Fed paused its process of lowering interest rates over the past five FOMC meetings; however, core inflation remains elevated at 2.7%, well above the Fed’s target of 2.0%. We will likely see the pause in interest rate decreases remain in place until late-2025 or the first part of 2026. That being said, some analysts are still expecting at least one 25 basis point rate cut before the end of the year.

2. GDP, Yield Curve, Employment, & Consumer Confidence

The yield curve reversed its inversion in late 2024 but due to a resilient economy, the interest rates on the short end of the yield curve have fallen while the long end moved up giving us the steepest yield curve in several years. Employment numbers remain steady and a recession is probably not on the immediate horizon this year, so we probably need to expect higher interest rates for longer than we expected to see over the past year. Total job openings continue to tick down and Private (ADP) employment gains are showing signs of slowing as well but Consumer Sentiment, measured by the University of Michigan Consumer Sentiment Index, has steadily been moving up since hitting support at 50.8 at the end of March and now is at 60.7 as of the second quarter. It is believed that second quarter GDP will be at or below 1% annualized growth but a few analysts are warning that GDP for the second quarter will actually be negative as it was in the first quarter.

3. Geopolitical Risks

The global capital markets continue to face several geopolitical risks as we move into the third quarter of 2025, which could significantly impact investor sentiment and market stability. One key concern is the continued speed of policy changes coming from the Trump administration during his first year in office, as well as the effect of the recently signed “One Big Beautiful Bill.” We are also still dealing with the ongoing war in Russia and Ukraine even with all the efforts by the Trump administration to get both sides to the table to negotiate a lasting peace. The trade conflicts and tariffs with China seem to be on track for resolution, easing tensions between the two global superpowers. We believe that volatility in stock prices will remain high and may be driven by new issues that we haven’t considered yet. As usual, we will closely monitor global and domestic developments and assess their potential impacts on our investment strategies.

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.

We are confident that we are still in the early innings of the bull market as the markets returned to the upward path with positive performance this quarter for all our ETFs. We were also pleased to see a few of our ETFs outperforming their secular benchmark. We were not surprised to see the correction of -10% or more in March and April as we had been warning about that possibility for the past several quarters. We still expect the broader large-cap market as well as the small- and mid-cap markets that have been ignored for most of the past two years, to show tremendous upside potential in the next 12 to 24 months. We will always face headwinds but the market almost always ‘climbs a wall of worry’ so we need to remain patient and stay 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 2025 and beyond.

We are thankful for 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.

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Inspire Investing, LLC serves as the investment adviser to the Inspire ETFs mentioned in this document. As such, Inspire receives management fees from these funds. This creates a conflict of interest as the firm has a financial incentive to promote its proprietary funds. Inspire seeks to mitigate this conflict through disclosure and a fiduciary duty to recommend investments suitable for clients.

Certain statements contained in this document may be forward-looking in nature and based on current expectations, estimates, and projections. Such statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Actual outcomes may differ materially.

This content is provided for educational and informational purposes only and should not be considered personalized investment advice. Inspire does not provide legal, tax, or accounting advice. Please consult your own advisor regarding your specific situation.

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