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Quarterly Review & Commentary
Quarter Four · Two Thousand and Twenty Three

Prepared by Darrell W. Jayroe, CFA, CFP®, CKA®



SENIOR PORTFOLIO MANAGER





For institutional use only
Economic Summary
The U.S. economy continued its resilient climb.

In the final quarter of 2023, the U.S. economy continued its resilient climb. U.S. Real (i.e. inflation-adjusted) Gross Domestic Product (GDP) is estimated to have grown 2.0% (annualized) during the last three months of the year. For the entire year, it is estimated that GDP increased 2.5%. Remarkably, despite many predictions at the outset of 2023 for a recession, the economy has now had positive growth for six straight quarters.

The main contributor to the economy’s remarkable resiliency is the on-going strength of the labor market and thereby the U.S. consumer. The Unemployment Rate for December came in at 3.7%. Over the past year, the number of jobs grew an average of 225,000 per month. Even more impressive, average hourly earnings grew a solid 4.1% in 2023.

The top economic worry for most these days has been inflation. Given the strength of the economy as well as the labor market, expectations have been that inflation pressures would persist making it difficult for the Federal Reserve’s to reach its 2% target. Despite these challenges, however, inflation has staged a remarkable decline from its pandemic highs. The most recent Consumer Price Index (December 2023) showed an annual increase of just 3.4%. On the back of that improving inflation picture, in the fourth quarter of 2023, interest rates came down dramatically from elevated levels that had not been seen in over 15 years.

Therefore, combining the resilient economy with the surprisingly improving inflationary environment, it looks as if a rare “soft landing” could actually be materializing! Nevertheless, going forward there are a growing number of reasons for concern: the on-going conflict in the Israel/Gaza region, Russia’s war against Ukraine, worsening China relations, commercial real estate, and the nation’s debt continuing to climb.

Globally, economies have likewise seen moderating inflation along with respectable growth. However, they face the same geopolitical hazards seen from the U.S. Meanwhile, foreign currencies have been enjoying a bit of a tailwind as US interest rate differentials have narrowed versus the other major currencies. US investors investing internationally have benefited.

Going forward, investors should enjoy the Goldilocks economy while it lasts, but be alert for risks known and unknown. Remain focused on long-term goals while looking to make tactical adjustments as needed.

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

The 4th quarter brought a rally to the markets after we experienced a pullback the previous quarter and what appears to be the correction predicted by some analysts for the past year although it was short lived. The S&P 500 led the rally after Halloween but fell behind the strong momentum of the Small-Cap market in the last half of December. The S&P 500 Index was able to finish the quarter in line with the Mid-Cap index with both falling behind the surging Small-Cap Index. Investors turned optimistic about the economic recovery and fear abated as the threat of higher interest rates seemed to be taken off the table. The S&P 600 Small-Cap index ended the quarter with an impressive gain of 15.07% while the S&P 500 and the S&P 400 Mid-Cap indexes posted gains of 11.68% and 11.66% respectively. The S&P International 700 Index exhibited a similar track by starting the quarter in line with the US markets and finishing with a positive performance of 10.49%.

Over the past 12 months, the stock market witnessed a generally positive trajectory across all the major equity indexes. The S&P 500 experienced significant growth during this period, reflecting a strong rebound from the bear market of 2022 turning in a one-year number of 26.26%. Similarly, the S&P 400 and S&P 600, representing mid-cap and small-cap companies, also enjoyed overall gains. The S&P 400 Mid-Cap index posted a one-year return of 16.39% and slightly outpaced the S&P 600 Small-Cap index that returned 15.94% during the same time frame. These indexes benefited from the broader market rally, driven by optimism about economic recovery and hopes that if a recession actual comes next year, it will be a relatively “soft landing.” As for the S&P International 700 index, it followed a similar pattern, but with variations influenced by regional economic factors and geopolitical events was not able to outpace the US Large-Cap markets but did exceed the US Small- and Mid-Cap markets with a respectable 12-month return of 18.01%. Overall, the past 12 months exhibited positive market sentiment even with facing continued headwinds of rising interest rates and inflation numbers not falling as fast as the markets previously had hoped. There can be no more debate between those that think we are in a “bear market bounce” and those that think we have just kicked off the next “bull market”; it should be obvious that we are in the first leg of the new bull market. We believe even though the markets could still move higher over the next 12 months, there is a high probability that we could see some profit taking which could give us a chance of a 10%+ correction during the first half of 2024.

Economic Indicators and Calendar

Inflation - CPI Month over Month Release Date & Time Period Survey Actual
CPI MoM 01/12/2023 08:30 Dec -0.10% -0.10%
CPI MoM 02/14/2023 08:30 Jan 0.40% 0.50%
CPI MoM 03/14/2023 08:30 Feb 0.40% 0.40%
CPI MoM 04/12/2023 08:30 Mar 0.20% 0.10%
CPI MoM 05/10/2023 08:30 Apr 0.40% 0.40%
CPI MoM 06/13/2023 08:30 May 0.10% 0.10%
CPI MoM 07/12/2023 08:30 Jun 0.30% 0.20%
CPI MoM 08/10/2023 08:30 Jul 0.20% 0.20%
CPI MoM 09/13/2023 08:30 Aug 0.60% 0.60%
CPI MoM 10/12/2023 08:30 Sep 0.30% 0.40%
CPI MoM 11/14/2023 08:30 Oct 0.10% 0.00%
CPI MoM 12/12/2023 08:30 Nov 0.00% 0.10%
CPI MoM 01/11/2024 08:30 Dec 0.20% 0.30%
(Source: Bloomberg)

Inflation came in at 0.0% (Month over Month) in October, beating the expectation of a 0.10 increase, but rose again by 0.10% (Month over Month) in November. The expectation for the month over month number in December was for an increase of 0.2% but came in at +0.30% when it was released on January 11th, exceeding expectations by 10 bps. If we can see month over month numbers stay in the 0.0% to 0.20% territory for the next several months, then the CPI year over year number will come back towards the 2 to 2.5% level over the next 12 months.

(Source: Bloomberg
Economic Growth Release Date & Time Period Survey Actual
GDP 01/26/2023 08:30 4Q A 2.6% 2.9%
GDP 02/23/2023 08:30 4Q S 2.9% 2.7%
GDP 03/30/2023 08:30 4Q T 2.7% 2.6%
GDP 04/28/2023 08:30 1Q A 1.8% 1.1%
GDP 05/25/2023 08:30 1Q S 1.1% 1.3%
GDP 06/29/2023 08:30 1Q T 1.5% 2.0%
GDP 07/27/2023 08:30 2Q A 1.8% 2.4%
GDP 08/30/2023 08:30 2Q S 2.4% 2.1%
GDP 09/28/2023 08:30 2Q T 2.2% 2.1%
GDP 10/26/2023 08:30 3Q A 4.4% 4.9%
GDP 11/29/2023 08:30 3Q S 5.0% 5.2%
GDP 12/21/2023 08:30 3Q T 5.2% 4.9%
(Source: Bloomberg)  (A= Advance; S= Second: T= Third)

GDP growth came in stronger than the initial expectation of +4.4% for the 3rd  Quarter, with an actual +4.9% growth rate for the quarter in the Advance Release and although being revised upward to 5.2% for the Second release came in at 4.9% with the Third revision in line with the original release. The debate among economists and market pundits continued during the 4th quarter as to “when will the recession end” even though there has been no definite proclamation of a recession yet.  

The probability of a recession has dropped from 65% in July to 50% according to Bloomberg survey. Yield curve (10s - 2s) remains inverted; note that a recession often is called shortly after the inversion corrects.

Labor Market Release Date & Time Period Survey Actual Revised
Unemployment Rate 1/6/2023 8:30 Dec 3.7% 3.5%
Unemployment Rate 2/3/2023 8:30 Jan 3.5% 3.4%
Unemployment Rate 3/10/2023 8:30 Feb 3.4% 3.6%
Unemployment Rate 4/7/2023 8:30 Mar 3.6% 3.5%
Unemployment Rate 5/5/2023 8:30 Apr 3.6% 3.4%
Unemployment Rate 6/2/2023 8:30 May 3.5% 3.7%
Unemployment Rate 7/7/2023 8:30 Jun 3.6% 3.6%
Unemployment Rate 8/4/2023 8:30 Jul 3.6% 3.5%
Unemployment Rate 9/1/2023 8:30 Aug 3.5% 3.8%
Unemployment Rate 10/6/2023 8:30 Sep 3.7% 3.8%
Unemployment Rate 11/3/2023 8:30 Oct 3.8% 3.9%
Unemployment Rate 12/8/2023 8:30 Nov 3.9% 3.7%
Unemployment Rate 1/6/2024 8:30 Dec 3.8% 3.7%
Nonfarm Payrolls (Change) 1/6/2023 8:30 Dec 207k 223k 290k
Nonfarm Payrolls (Change) 2/3/2023 8:30 Jan 198k 517k 239k
Nonfarm Payrolls (Change) 3/10/2023 8:30 Feb 223k 311k 472k
Nonfarm Payrolls (Change) 4/7/2023 8:30 Mar 224k 236k 248k
Nonfarm Payrolls (Change) 5/5/2023 8:30 Apr 186k 253k 217k
Nonfarm Payrolls (Change) 6/2/2023 8:30 May 192k 339k 217k
Nonfarm Payrolls (Change) 7/7/2023 8:30 Jun 228k 209k 306k
Nonfarm Payrolls (Change) 8/4/2023 8:30 Jul 210k 187k 105k
Nonfarm Payrolls (Change) 9/1/2023 8:30 Aug 171k 187k 236k
Nonfarm Payrolls (Change) 10/6/2023 8:30 Sep 174k 336k 227k
Nonfarm Payrolls (Change) 11/3/2023 8:30 Oct 176k 150k 262k
Nonfarm Payrolls (Change) 12/8/2023 8:30 Nov 182k 199k
Nonfarm Payrolls (Change) 1/6/2024 8:30 Dec 170k 216k
(Source: Bloomberg)

The Unemployment rate rose to 3.9% in October after staying level at 3.8% in August and September. In November we saw the unemployment rate drop back to 3.7%, beating expectations of it remaining at 3.9% for another month. The rate stayed level at 3.7% for the month of December, beating the street estimate of an increase to 3.8%. It is still possible we could see unemployment rise above 4% in the first half of 2024 as the economy slows and if layoffs increase; however, with so many jobs still open and unfilled in the US, it may take some time before those laid off add to the unemployment rolls.

Nonfarm Payrolls continue to have solid monthly numbers and may remain strong in the face of a potential recession as those that are laid off in the coming months may be able to fill some of the 8 million+ job openings in the US. If the employment picture remains this robust the Federal Reserve will not be inclined to cut interest rates as soon as some analysts are predicting.

Monetary Policy - Federal Reserve Meeting Date Rate Decision (%) For Against
FOMC Meeting 02/01/2023 0.25 12 0
FOMC Meeting 03/22/2023 0.25 11 0
FOMC Meeting 05/03/2023 0.25 11 0
FOMC Meeting 06/14/2023 0.00 11 0
FOMC Meeting 07/26/2023 0.25 11 0
FOMC Meeting 09/20/2023 0.00 11 0
FOMC Meeting 11/01/2023 0.00 12 0
FOMC Meeting 12/13/2023 0.00 12 0
(Source: Bloomberg)

The Federal Open Market Committee have left the Federal Funds rate unchanged during their final three meetings of 2023, and everyone believes that there will be no more interest rate increases in this cycle.    Based on Chair Powell’s recent comments, we should not be surprised if we see a rate cuts in the future but did not hint as to when the first rate cut should be expected, although many analysts fully expect the rate cut cycle to begin before the end of 2024.  As the Federal Reserve was late to start raising interest rates, it is highly likely that they will be late to cut interest rates as the economy starts to slow causing unnecessary damage to the economy in their efforts to avoid sparking more inflation.

(Source: Bloomberg)
Inspire 100 ETF [NYSE: BIBL]

BIBL outperformed the S&P 500 Index by 53 bps for the quarter with returns of 12.20% and 11.68% respectively.  

The outperformance of BIBL to the S&P 500 index is partially due to the strong performance in the Healthcare Sector of +11.05% vs. the sector return in the benchmark of only 6.41%.

The exposure to smaller companies in BIBL in the Energy Sector actually helped the performance of the fund in relation to the S&P 500 during the quarter, being down only -2.90% vs the sector in the index being down -6.93%.

We believe as the new bull market gains momentum, BIBL is well positioned to outperform the S&P 500 due to the tilt to the smaller side of the market cap spectrum as well as its strong core positioning benefiting from both value and growth exposure.

(Source: Bloomberg)

Past performance is no guarantee of future results. The performance data quoted here represents past performance. Current performance may be lower or higher than the performance data quoted above. Investment return and principal value will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. For performance data current to the most recent month end, please call 877.658.9473.

Performance data as of
12/31/2023
. 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 ETF [NYSE: BLES]

BLES outperformed the S&P Global 1200 index during the 4th quarter with a return of 12.36% vs 11.29%.

With the strong performance of the US large cap market in relation to the international markets during the 4th quarter, BLES diverged from the global index for the quarter in a positive way.

We believe that the tilt to the smaller end of the large cap spectrum of BLES will continue to show favor as the economic numbers continue to improve over the next 6 to 12 months.

(Source: Bloomberg)

Past performance is no guarantee of future results. The performance data quoted here represents past performance. Current performance may be lower or higher than the performance data quoted above. Investment return and principal value will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. For performance data current to the most recent month end, please call 877.658.9473.

Performance data as of
12/31/2023
. 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 Fidelis Multi Factor ETF [NYSE: FDLS]

FDLS underperformed the MSCI All Country World ETF by -31 bps as well as underperforming the S&P 500 Index by -75 bps.  After a weak start to the quarter, FDLS climbed during the last two months of the quarter to peak in late December to finish with a quarterly return of 10.93%.

The equal weight exposure to different stocks in relation to the market cap weighted S&P 500 during the quarter contributed to the underperformance for the 4th quarter.

We believe that the diversified allocation of FDLS to US 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 new bull market gains momentum.

(Source: Bloomberg)

Past performance is no guarantee of future results. The performance data quoted here represents past performance. Current performance may be lower or higher than the performance data quoted above. Investment return and principal value will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. For performance data current to the most recent month end, please call 877.658.9473.

Performance data as of
12/31/2023
. 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 Mid Cap Momentum ETF [NYSE: GLRY]

GLRY rallied in the 4th quarter Q3 2024, which saw broad markets breakout from the correction in the previous quarter. The S&P 400 Midcap index outperformed GLRY late in the quarter, ending the quarter up +11.66% versus +5.73% for GLRY.

2023 was a rollercoaster ride for investors, especially those outside of the Magnificent Seven or market-weighted indices. Q4 was a great lift off for securities that didn’t participate as much in earlier bullish moves, and investors in mid-cap space saw high single or even double digit returns in a mere three months.

The rally was highly tied to the view that the Fed would cut interest rates sooner, which is historically good for equities and even more so small to mid-cap companies. Our expectation for 2024 is that market movement will be highly correlated to Fed intent and then action (or inaction). We want to remain nimble in any environment.

Looking ahead, our methodology has not changed and will continue finding companies using our FEVRR methodology. We will find companies that have strong financial health and sustainable earnings, which lets them make strategic decisions in a similar or a lower rate environment. We will find companies that have attractive valuations and price momentum, which assists with entry and exit points. And we will continue investing in companies that glorify God through good stewardship.

—Matt Melott, Manager

(Source: Bloomberg)

Past performance is no guarantee of future results. The performance data quoted here represents past performance. Current performance may be lower or higher than the performance data quoted above. Investment return and principal value will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. For performance data current to the most recent month end, please call 877.658.9473.

Performance data as of
12/31/2023
. 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 ETF [NYSE: ISMD]

ISMD outperformed the S&P Midcap 400 index by 264 bps but underperformed the S&P Small cap 600 Index by only -77 bps for the 4th quarter giving ISMD a total quarterly return of 14.30%.

The small and mid-cap markets continued the weakness of the previous month to start the quarter but reversed in late October to finish the quarter strong upward momentum to close out the last quarter of the year.

The equal weighting of the 500 stocks in ISMD were in line with the market cap weighted small- and mid-cap indexes showing that the correlation in the small and midcap markets and ISMD remains strong.

(Source: Bloomberg)

Past performance is no guarantee of future results. The performance data quoted here represents past performance. Current performance may be lower or higher than the performance data quoted above. Investment return and principal value will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. For performance data current to the most recent month end, please call 877.658.9473.

Performance data as of
12/31/2023
. 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 ETF [NYSE: RISN]

RISN returned +9.71% in the 4th Quarter on a total return basis outperforming the S&P Target Risk Moderate TR Index benchmark for the quarter, which returned +8.40%.

We attribute this performance for the quarter to our continued elevated allocation to equities which began in July and was held through the third & fourth quarters. We increased the equity allocation up to approximately 80% and have remained at that level. The overall US stock market experienced a considerable increase in value in the fourth quarter which buoyed our equity position for the period.

Additionally, we improved the screening criteria that we use to select the stocks within the equity allocation of the fund to focus on Large-Cap, biblically aligned stocks with good historical revenue/profit growth, low debt, high returns on invested capital that are selling at a lower PE ratio compared to their historical average. This shift in focus has proven beneficial and we will continue using this method for the foreseeable future.

We continue to hold short term floating rate government bonds as the “defensive” position for the 20% of the fund that is not allocated to equities, and planned to remain here until it looks like the FED has completed their interest rates increases or began to lower short term rates.

— Jacob Chandler, Manager

(Source: Bloomberg)

Past performance is no guarantee of future results. The performance data quoted here represents past performance. Current performance may be lower or higher than the performance data quoted above. Investment return and principal value will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. For performance data current to the most recent month end, please call 877.658.9473.

Performance data as of
This is some text inside of a div block.
. 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 ETF [NYSE: WWJD]

WWJD was up +12.77% in the 4th quarter, outperforming the S&P International 700 TR Index return of 10.49%, a strong outperformance of 228 basis points.

Being highly correlated with the index during most of the quarter 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 the outperformance of WWJD in the coming year as it is equally weighted, and the index is market cap weighted.

(Source: Bloomberg)

Past performance is no guarantee of future results. The performance data quoted here represents past performance. Current performance may be lower or higher than the performance data quoted above. Investment return and principal value will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. For performance data current to the most recent month end, please call 877.658.9473.

Performance data as of
12/31/2023
. 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

Yields Fell Sharply -  The yield curve reversed the most recent course and fell across the rate spectrum giving strong returns in the fixed income market for the quarter. Interest rates from the 3-month to 30 yr. maturities all fell in the 4th quarter, as the Federal Reserve gave clear signals that they have completed their policy of raising interest rates after their third “pause” in a row during their most recent FOMC Meeting in December.

As of the end of the 4th quarter, the 3-month T-Bill yield fell from 5.451% to 5.344%, an 11 bps decrease, vs the 10-year US Treasury which fell by 69 bps from 4.572% to 3.88%.

The 2-year U.S. Treasury yield decreased from 5.046% to 4.251%, the 5-year yield fell from 4.611% to 3.848% (a decrease of 76 bps) and the 30-year treasury fell from 4.701% to finish the quarter at 4.029% (a decrease of 67 bps).

The probability of a recession has moderated as the economy has not slowed as much as expected and the employment numbers and consumer spending remain strong. Although a recession is still avoidable the probability remains around 50%, according to Bloomberg survey results.

Source: Bloomberg 12-30-2023

Inspire Corporate Bond ETF [NYSE: IBD]

IBD was up 5.60% in the 4th quarter, matching the fixed income benchmark of the Bloomberg Barclays US Intermediate Credit Index, which was up 5.60% as well.  

The continued dramatic collapse in the yield curve brought positive performance for intermediate bonds in Q4 as well as the longer end of the yield curve.

With the high probability of the Federal Reserve having completed their process of raising interest rates over the past two years, it is highly likely that the yield curve could continue a shift in a parallel fashion to the downside in the 1st quarter allowing for continued positive returns during the first half of 2024.

(Source: Bloomberg)

Past performance is no guarantee of future results. The performance data quoted here represents past performance. Current performance may be lower or higher than the performance data quoted above. Investment return and principal value will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. For performance data current to the most recent month end, please call 877.658.9473.

Performance data as of
12/31/2023
. 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

Inflation, Money Supply, and Central Bank Response

The November CPI month-over-month reading was 0.1% which was above the consensus of no change. Year-over-year inflation has ticked down recently to 3.1% given the recent decrease in energy prices.  Based on Chair Powell’s recent comments, we have reached a terminal level of interest rates around 5.5%, and they are expected to fall starting sometime in early 2024.  Based on this, many investors are of the belief that the inflation scare is well behind us.  However, core inflation remains high at 4.0% and well above the Fed’s target of 2.0%.  We will continue to closely monitor monthly inflation readings and the Fed’s response as this will continue impacting capital market returns and volatility in the months ahead.

GDP, Yield Curve, Employment, & Consumer Confidence

The final third quarter GDP figure came in at 4.9% below the consensus of 5.2%. This figure was very strong as expected; however, we believe we are in a trend of slowing growth which could get worse especially if personal consumption, business investment, and home building continue to slow going into 2024. In addition, the yield curve remains inverted (which generally occurs leading up to a recession) and the Conference Board’s leading index has never declined this much in six months without a recession. With inflation still running higher than the Federal Reserve’s target and the labor market remaining strong, the Fed may be forced to keep rates higher for longer to continue to try to bring down inflation. Therefore, with the risk of a recession occurring in the next few quarters still possible, we will continue to keep a close eye on growth figures going forward.

Corporate Profits

As we finish out 2023, corporate profits have so far remained fairly strong and were even revised higher (up 3.4% from the second quarter, but still down 0.6% from a year ago). We expect profits to fall (or at least have only modest gains), particularly given the impact of higher interest rates and potentially slowing consumer demand. We will continue to keep a close eye on corporate earnings as this will impact equity performance going into 2024.

Geopolitical Risks

The global capital markets continue to face several geopolitical risks in the coming year, which could significantly impact investor sentiment and market stability. One key concern is the ongoing war in Israel and the middle east against the terrorist proxies of Iran in Hamas, Hezbollah, and the Houthi rebels. Although this has not caused a disruption in the oil supply from the middle east yet, that could change if the conflict spreads due to increased belligerence from Iran. The Russia/Ukraine war appears to have reached a stalemate but neither side is showing any willingness to negotiate an end to the fighting yet. Political unrest, civil conflicts, and potential changes in leadership in various regions can also introduce instability and raise concerns about the business environment in the next several months. This could result in increased market uncertainty, fluctuations in stock prices, and the need for us to closely monitor global developments and assess their potential impacts.

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Closing Remarks

The markets are now showing signs that the bear market has entered hibernation and we have started the first leg of the new bull market. Although we don’t like to see a negative quarter, that does happen periodically even during the first stages of a new bull market. We will not be surprised to see some profit taking during the first quarter of the new year and a correction of -10% or more in the next few months would not change our conclusion that the new bull market is in the early innings. As we are still facing the same headwinds from the last couple of years  – inflation, high interest rates, war in Ukraine  and now in the middle east too– we need to remain patient and 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 2024 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

FOR INSTITUTIONAL INVESTORS ONLY. NOT FOR USE WITH RETAIL INVESTORS.

Darrell W. Jayroe, CFA, CFP®, CKA®
Senior Portfolio Manager
Darrell Jayroe, CFA, CFP, CKA, serves as Inspire’s Senior Portfolio Manager responsible for leading the firm’s Investment Committee, as well as serving as Lead Portfolio Manager for Inspire’s ETFs and SMA strategies. Darrell has been with the firm since 2016. Prior to joining Inspire, Darrell was a Vice President and Sr. Portfolio Manager for the Bank of Oklahoma trust department for 12 years where he was responsible for managing accounts for high net worth families, trusts, foundations and institutions. Darrell started his career as an investment advisor in 1994 with PaineWebber in Oklahoma City. Darrell received a B.A. and Masters degree from Southern Nazarene University in Bethany, Oklahoma. He is a CFA (Chartered Financial Analyst) charter holder and is a CFP® (Certified Financial Planner®) licensee. He is a member of the CFA Institute and a member and Past President of the CFA Society of Oklahoma. He is also a member of Kingdom Advisors and holds the CKA® (Certified Kingdom Advisor®) designation. Darrell and his wife, Beth, have been married since 1982 and have two daughters, a son in law and three 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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Note: Giving can and does change to meet changing ministry needs. Total lifetime giving $243,372 as of 12/31/23.

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