The second quarter started with markets attempting to stabilize after the volatility created late in the first quarter, and that momentum improved as the quarter progressed, when it appeared the immediate worst-case concerns surrounding the Iran conflict and energy market disruption were beginning to ease. U.S. and global equity markets found support during the quarter, with the broader market participation remaining strong as small-cap, mid-cap, large-cap, and international stocks all finished the quarter with positive returns. The S&P 600 Small Cap Index, the S&P 400 Mid Cap Index, the S&P 500 Index, and the S&P International 700 Index all ended the quarter with positive returns of 19.69%, 14.47%, 15.20%, and 15.09%, respectively.

Over the past 12 months, the stock market witnessed a generally positive trajectory across all the major equity indexes, despite periods of volatility tied to inflation concerns, shifting expectations for interest-rate cuts, and geopolitical uncertainty surrounding the Iran conflict. The small-cap market represented by the S&P 600 Small Cap Index had the strongest performance over the past year, with a total return of 37.56%. The S&P 400 Mid Cap Index also experienced strong growth during this period, turning in a one-year return of 25.87% on a total return basis. The S&P 500 Index and the S&P International 700 Index also enjoyed overall gains in the past year of 22.29% and 31.17%, respectively. Overall, the past 12 months exhibited positive market sentiment even in the face of continued headwinds from inflation numbers not falling as fast as the markets had previously hoped, interest rates not falling as much as most analysts had predicted, and ongoing uncertainty around the economic and market impact of the Iran war. Although we are still in the early innings of the current bull market, we could easily see a correction in the next few months as investors digest the strong gains from the past year and assess the longer-term effects of higher energy prices, Fed policy, and global instability. Even with this warning in mind, we recommend investors remain invested and stay focused on the long-term opportunities in a well-diversified global portfolio, as the probability of positive returns over the next 12 to 24 months remains favorable.

Economic Indicators and Calendars

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Inflation came in at 0.60% (month-over-month) in April, meeting expectations, which fell from the peak in March of 0.90%. The numbers also came out in line with expectations for May at 0.50%, and the expectation for inflation to fall in June beat the expectation by falling -0.40%. As of the end of the first quarter, the headline Inflation number fell from 4.2% at the end of May to 3.5% at the end of June. We will likely see month-over-month numbers come back down in the next few months if the conflict with Iran escalates and the Strait of Hormuz is reopened. Core inflation, which strips out volatile food and energy, ended the quarter at 2.6%.

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

The initial GDP report for the first quarter was expected to come in at 2.2% but fell short, at 2.0%, when it was released in April. When the “second” release came out in May, GDP growth came in even lower than the expectation of 2.0%, at only 1.6% for the first quarter. The forecast was revised to 1.7% for the third release but surprised on the upside when it was published on June 25th at 2.1%. The debate among economists and market pundits during the past quarter has been focused on whether the Iran war and the higher inflation numbers would cause a recession. For now, the economic outlook remains uncertain.

The yield curve is no longer inverted, but there is now fear of a recession driven by a slowing labor market, slower consumer spending, and uncertainty over the economic effects of the war in Iran and the rise in oil prices on U.S. consumers.

Source: Bloomberg

The unemployment rate remained steady at 4.3% in April and May, due to a resilient economy in the face of the uncertainty of the ramifications of the Iran war. A surprise number came in June when the unemployment rate fell to 4.2%, when the expectation was for it to remain at 4.3%. Although we are still above the 4% level, it’s possible we could see the unemployment rate begin a downward path if the economy remains resilient in the second half of 2026.

Nonfarm Payrolls had a sporadic showing during the past three months, with April coming in at 115k jobs, which was above the estimate of 67k. Then, in May, 172k jobs were created when only 86k new jobs were expected. The new job numbers reversed course in June, with new job expectations of 113k, but we actually only saw jobs grow by 57k.

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Source: Bloomberg

The Federal Open Market Committee continued down the path of sitting on its hands by keeping the Federal Funds Rate “unchanged” during the most recent meetings in April and June. One was Powell’s last meeting as Chairman, and the most recent was the first with Kevin Warsh as the new Chairman. Based on the recent comments of the new Chairman, we should not be surprised if the pause in rate cuts will remain the plan for the remainder of the year, and there was even a hint that the next move could be a rate increase, with the fear of inflation still on the horizon. The current expectation is for the federal funds rate to gradually decline toward the 3.25% range. While a cooling labor market would typically justify rate cuts, concerns about inflation remain. Instead of an aggressive easing policy, the Fed has been extremely slow in its moves, waiting for clearer data on both inflation and broader economic conditions.

• BLES underperformed the S&P Global 1200 index during the second quarter with a total return of 8.87% vs 15.16% for the global index.
• Weak stock selection in the international and emerging markets more than offset positive performance from the fund’s U.S. large-cap exposure, causing BLES to significantly underperform the global index.
• We believe that the tilt to the smaller end of the large-cap spectrum of BLES will prove to be advantageous again, as we saw in the first quarter, as the global economic numbers are expected to 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 last quarter and continued its upward momentum in the second quarter, after a shallow correction in May, finishing the quarter just 50 bps behind the MSCI All Country World Index, with returns of 14.56% and 15.06%, respectively.
• 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 remained highly correlated to the S&P 400 Midcap index in the volatile second quarter, ultimately outperforming the index with a return of 17.75% vs 14.47%.
• The second quarter showed positive momentum in the first month of the quarter, but that momentum took a rest in May as the markets contemplated the continued ramifications of the  Iran war.  The momentum returned in June as talks of a long-term ceasefire were made public.
• Although the growth factors should remain in favor for the second half of 2026 and into 2027, they could pull back periodically on profit-taking before the end of the year. However, our approach will not change as we will continue to look for great companies using the FEVRR methodology. We will find companies that have strong financial health and sustainable earnings, which allow them to make strategic decisions in a similar or lower-rate environment. We will find companies that have attractive valuations and price momentum, which assist 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 outperformed both the S&P Small Cap 600 Index and the S&P Midcap 400 Index for the second quarter, with a return of 25.38% vs the small cap index at 19.69% and vs the S&P 400 Mid Cap Index that was up 14.47%.
• The mid-cap market and the U.S. small-cap market rallied in the last few weeks of the fourth quarter and maintained that momentum into the first quarter of 2026 and accelerated higher in the second quarter.
• The equal weighting of the 500 stocks in ISMD performed very well relative to 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 gaining wider acceptance and momentum. This should benefit ISMD as the U.S. large-cap and mega-cap stock 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 underperformed the S&P 500 Index by 61 bps with returns of 14.59% and 15.20%, respectively, for the second quarter.  
• The slight underperformance of PTL relative to the S&P 500 Index is due to exposure to smaller large-cap companies that have shown slowing momentum during the second quarter, as attention is back on the mega-cap growth stocks that dominate the S&P 500 Index.
• We believe that as the bull market continues its upward momentum in 2026, PTL is well positioned to continue to compete with and possibly even 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 7.41% for the quarter, bringing its annualized performance to 7.17% since inception on July 15, 2020. RISN outperformed its benchmark this quarter—the S&P Target Risk Moderate TR Index posted a 6.03% return.

• Capital Appreciation Sleeve

RISN maintained an 80% equity allocation throughout the quarter. Our equity strategy targets U.S. companies that score highly on the Inspire Impact Score, biblically aligned businesses that are primarily mid- to large-cap with strong fundamentals: consistent revenue and profit growth, low debt, and attractive valuations.

• Principal Preservation Sleeve

The remaining 20% sits in short-term U.S. government bonds, providing a defensive buffer. We removed the floating rate component last quarter in anticipation of potential rate cuts, but unfortunately, they have not materialized.

We're also watching gold. Current prices have fallen dramatically from the peak in March, but we are still evaluating an appropriate and compelling entry point for this sleeve.

• Looking Ahead

Our allocation remains 80% equities/20% fixed income, but we're actively evaluating a shift back to 70/30 if markets become overpriced. Our long-term objective is unchanged: preserve principal, grow capital over time, and stay 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 returned 4.44% during the second quarter, compared with a 15.09% return for the S&P International 700 TR Index.
• While WWJD's performance has tracked the index more closely in recent quarters, relative performance diverged significantly during the second quarter. WWJD holds approximately 200 stocks compared with 700 market-cap-weighted positions in the benchmark, and these differences in portfolio construction can have a meaningful impact on relative performance from quarter to quarter. This can work to the fund's advantage in some periods and to its disadvantage in others.
• An overweight allocation to the Technology sector, along with security selection within Industrials, were the primary drivers of underperformance during the quarter.
• Despite the disappointing quarter, we remain confident in the fund's disciplined investment approach and its potential to deliver strong relative performance over time.

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  0.94% in the first quarter on a total return basis, slightly underperforming the fixed income benchmark of the Bloomberg Barclays U.S. Intermediate Corporate Index, which was up 0.98%.
• The parallel rise across the entire yield curve brought the most pressure to intermediate bonds in the first quarter, which hurt IBD  as well as other investment-grade bond funds in their peer group, but the interest income allowed the fund to finish with a positive total return.
• With the Federal Reserve having paused its process of lowering interest rates so far in 2026 with no rate cuts expected until 2027, the yield curve moved upward across maturities from 3 months to 30 years. We are now expecting the FOMC to remain on pause for rate reductions as Chairman Warsh is not telegraphing any rate cuts in 2026, as they are more concerned about inflation than about the weakening economy.

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 continued to pause its process of lowering interest rates through the second quarter, leaving rates unchanged at the April and June FOMC meetings as policymakers remained focused on the risk that inflation could stay above target longer than expected. The June CPI report brought some temporary relief, with headline inflation falling to 3.5% year-over-year after hitting 4.2% in May, while core inflation declined to 2.6% as lower gasoline and energy prices helped offset the earlier inflation spike tied to the Iran war. However, with energy markets still vulnerable to renewed hostilities in the Strait of Hormuz and the Fed’s own June projections showing a higher expected path for inflation and the federal funds rate, we do not expect the FOMC to move quickly toward rate cuts in Q3. Chairman Warsh has already signaled that the Fed will remain cautious, and if inflation reaccelerates because of higher oil prices or renewed supply-chain disruptions, the market may need to adjust to the possibility that the next policy move is not a cut, but an extended pause or even a hike.

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

The yield curve is no longer inverted, but it moved higher across most maturities during the second quarter as investors digested the lack of rate cuts, persistent inflation pressure, and the economic uncertainty created by the Iran conflict and higher energy prices. GDP growth improved from the very weak final fourth-quarter reading of 0.5%, with the third estimate of first-quarter GDP coming in at 2.1%, but we are still watching closely to see whether the second-quarter numbers confirm that the economy remains resilient or begins to show more meaningful slowing. Employment has remained mixed, with the unemployment rate falling to 4.2% in June even as nonfarm payrolls slowed to only 57k new jobs versus expectations of 113k. Consumer sentiment has also improved from the record-low May reading, with the University of Michigan Consumer Sentiment Index rising to 49.5 in June from 44.8 in May as gasoline prices moderated, but it remains well below historical norms and nearly 20% lower than a year ago. The combination of modest GDP growth, a still-fragile consumer, a cooling but not collapsing labor market, and a higher yield curve suggests that recession risk has increased but is not yet the base case as we enter the third quarter.

3. Geopolitical Risks

The global capital markets continue to face several geopolitical risks as we move through 2026, and the Iran war remains the most important near-term issue because of its direct connection to global energy prices, shipping traffic through the Strait of Hormuz, inflation expectations, and investor confidence. The temporary easing of tensions helped oil and gasoline prices fall in June, but renewed hostilities in recent days remind us that the risk of another spike in energy prices has not gone away. The ongoing Russia-Ukraine war is also still present, with both sides continuing to escalate attacks even as diplomacy remains uncertain, and this conflict continues to influence European security spending, energy markets, and global risk sentiment. We also remain mindful of broader risks from trade tensions, defense spending, supply-chain stress, and the possibility that new issues could emerge quickly in an already fragile geopolitical environment. We believe volatility in stock and bond prices could remain elevated in Q3, especially if the Iran conflict expands, energy markets tighten again, or recession concerns rise. 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 believe that we are still in the early innings of the bull market and are thankful we experienced good results from our ETFs in the past quarter, even with all of the global instability we see in our world today. The good news is that our God is still on the throne and in control. With the strong market performance over the past year as well as over the past quarter, we would not be surprised to see a correction of -10% or more in the next 3 to 9 months as investors look to take profits or rebalance their portfolios in light of all that is going on in the world. However, we still expect the broader large-cap market, as well as the small and mid-cap markets, to show 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.

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 remainder of 2026 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.