For Informational Use Only

Background

At the beginning of each year, the Inspire Investment Committee analyzes and updates its capital market assumptions for various asset classes. The assumptions below are long-term in nature (ten years+) and can be used to model different portfolio allocations, which in turn can be utilized by investors for investment planning purposes. The Inspire Investment Committee reviews historical return, risk, and correlation statistics for different asset classes and then formulates its assumptions based on current market conditions. These assumptions are based on our best estimates with the information available at the time of this writing, and there are no guarantees that these assumptions will be realized.

Key Takeaways

Return Assumptions:

• Inflation: High and sustained level of inflation, but slightly decreased to 2.5% given the recent moderation and contraction of the money supply
• US fixed income: Increased to 4.75% given higher expected long-term level of interest rates
• US equity: 7.5 – 9% range, with US small-cap equities outperforming their mid- and large-cap counterparts
• Non-US developed & emerging market equity: Maintained at 9.5% for non-US developed and slightly decreased to 10.0% for emerging markets, both with a probability of outperforming US equity

Risk & Correlation Assumptions:

• Risk(standard deviation) and correlation assumptions are in line with historical figures with a very modest increase for fixed income given the prospect of more interest rate volatility

Hypothetical Portfolio Results & Inspire Strategic Portfolio Allocations:

• Portfolio return assumptions have remained nearly the same as last year, given modest changes to capital market assumptions (e.g., a 60% Equity/40% Fixed Income portfolio is expected to return 7.2% over the next ten years versus 7.0% previously).

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• Inspire strategic allocations reflect long-term assumptions with overweights to US small-cap, US mid-cap, and international large-cap equity and underweights toUS large-cap relative to the global equity market (as represented by the MSCI ACWI IMI Index, which is one of the most comprehensive global all cap indices available with over 9,050 constituents and covering 99% of the global equity investment opportunity set).

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• Below are the Inspire strategic allocations as of March 31, 2024. These allocations remain unchanged from the previous year.  
  

Investor Implications

• There are many instances in the Bible that offer wisdom about planning ahead and being prudent with our money (e.g., Proverbs 13:16, Proverbs 15:22, and Luke 14:28-30). 
• At Inspire, we believe that the most prudent approach for a long-term investor is to maintain a proper asset allocation with disciplined rebalancing. This can be achieved with Inspire globally diversified strategies or individually constructed portfolios utilizing our broad array of ETFs.
• If you are working with an investor with a longer time horizon (10+ years), a portfolio with a higher allocation to equities would be appropriate.  However, if you work with an investor with a shorter time horizon (<5 years), a lower risk tolerance, and/or increased cash needs (e.g., greater than 5% annual spending), a more conservative portfolio with a higher allocation to fixed income would be appropriate.
• Although investors can expect slightly higher long-term returns now versus one year ago, those assumptions are still relatively modest compared to recent history.  For example, the S&P 500 returned 12.0% over the last ten years, even with the 26.3% return in 2023.  Although US large-cap equities have performed well versus other asset classes, our long-term assumptions and allocations favor US small-cap, US mid-cap, international, and emerging market equities.  Investors should also plan for increased volatility (both upside and downside), especially in the near term.
• If you have questions on how you can use this information with your clients, feel free to reach out to the Investment Management Team. We stand ready to work with you if you need help to determine where clients may fit on this spectrum and what Inspire disciplined strategy would be most appropriate for their needs, all while investing your values and giving glory to God!

This is a publication of the Inspire Investment Committee, as of April 2024.

Important Disclosure Information

This presentation is provided for informational and educational purposes only and should not be construed as personalized investment, legal, or tax advice. Inspire Investing, LLC (“Inspire”) is an SEC-registered investment adviser. Registration does not imply a certain level of skill or training.

This material includes forward-looking statements, long-term capital market assumptions, and hypothetical allocations. These projections are not guarantees of future results and are based on a number of estimates and assumptions that are inherently uncertain and subject to change. Actual performance may differ materially from these assumptions.

Any expected returns, forecasts, or projections included herein are purely illustrative and do not represent performance of any specific investment product. These assumptions do not reflect actual trading and are not intended to predict the performance of any specific account or strategy. Past performance is not indicative of future results.

The Inspire Impact Score™ is a proprietary, biblically responsible investment screening methodology used by Inspire to evaluate alignment with biblical values. While Inspire believes values alignment may improve long-term investor conviction, Inspire does not claim or guarantee that alignment with the Inspire Impact Score™ will result in superior investment performance. Any performance comparisons or data correlations between Inspire Impact Score and investment returns are provided for informational purposes only and should not be construed as predictive.

Investment decisions should be based on individual circumstances, risk tolerance, and objectives. Investors should not base investment decisions solely on values-alignment scoring or model assumptions. Please consult your financial, legal, or tax adviser before making any investment decision.

This presentation is intended for use with sophisticated investors or institutional clients familiar with the limitations of forward-looking financial modeling. It is not intended for broad retail distribution. For additional information, refer to Inspire's Form ADV, available at adviserinfo.sec.gov.