Summary
- Market Overview: The S&P 500 declined -4.3% in Q1, with early rotation into value giving way to inflation and geopolitical concerns late in the quarter.
- Sector Leadership: Energy led significantly (+38%), followed by Materials and Utilities, while Financials, Consumer Discretionary, and Technology lagged.
- Performance: The Johnson Equity Income Composite returned -2.8% net, outperforming the S&P 500 by roughly 150 basis points.
- Sector Allocation: An overweight to Energy and underweight to Technology, along with overweights in Utilities and Industrials, drove relative outperformance.
- Stock Selection: Security selection was a modest headwind, primarily from software holdings and not owning the largest Energy name.
- Opportunity Set: Valuation compression in software has created opportunities to upgrade portfolio quality at more attractive levels.
- Outlook: The strategy remains focused on capital preservation, valuation discipline, and high-quality companies to support long-term outcomes across market environments.
Video Transcript
Hello, I’m Charles Rinehart, portfolio manager for the Johnson Equity Income Composite.
Thank you for joining our 1Q Review. The S&P 500 declined 4.3% for the quarter, but the path to that outcome was far from linear.
In the first two months, we saw a strong rotation into large cap value, which outperformed growth by over 12%.
That move was supported by improving PMIs and lower interest rates - conditions that tend to favor more cyclical areas of the market.
At the same time, concerns around AI-driven disruption, particularly in software, pushed investors toward business models perceived as more insulated.
The result was a notable broadening of market leadership to start the year.
That narrative shifted in March.
Oil price volatility and rising inflation concerns tied to geopolitical tensions, particularly involving Iran, began to dominate.
Outside of Energy, every sector in the S&P 500 declined during the final month of the quarter.
For the full quarter, Energy was the standout performer, up over 38%, followed by Materials and Utilities.
On the other end of the spectrum, Financials, Consumer Discretionary, and Technology were among the weakest sectors.
Against that backdrop, the Johnson Equity Income Composite declined 2.8% net of fees, outperforming the S&P 500 by approximately 150 basis points.
Sector positioning was the primary driver of that outperformance.
An overweight to Energy was the most significant contributor, given the magnitude of the sector’s returns.
Underweight exposure to Technology also helped, as did overweights to Utilities and Industrials. Security selection, however, was a modest headwind.
The largest drag came from software holdings, where valuations have compressed meaningfully amid rising concerns about AI disruption.
In addition, not owning the largest Energy name detracted, reflecting our more defensive positioning within the sector.
Importantly, the dislocation in software has created opportunity.
We’re seeing the ability to upgrade the quality of the portfolio in that space at valuation levels we haven’t seen in years.
As we look ahead, our approach remains consistent.
We are focused on capital preservation and enhancing the long-term spending power of capital.
We believe a disciplined emphasis on valuation and quality is the most effective way to achieve those objectives—regardless of the market environment.
As always, we appreciate your continued confidence and look forward to updating you next quarter.
Published 04/27/2026
Johnson Asset Management (JAM) is a division of Johnson Investment Counsel, Inc. (“JIC”), an independent and privately owned Midwestern based investment advisory firm registered with the Securities and Exchange Commission. Johnson Asset Management manages institutional separate account portfolios for a wide variety of for-profit and nonprofit organizations, public agencies, public and private retirement plans, and personal trusts of all sizes. It may also serve as sub-adviser for mutual funds. JIC’s fees are available upon request and may be found in our Form ADV Part 2A. Performance data quoted herein represents past performance. Past performance does not guarantee or indicate future results. All data is current as of March 31, 2026 unless otherwise noted. Returns and net asset value will fluctuate. To determine if this strategy is appropriate for you, carefully consider the investment objectives, risk factors, and expenses before investing. Individual account management and construction will vary depending on each client's investment needs and objectives. Investments employing JIC’s strategies are NOT insured by the FDIC or by any other Federal Government Agency, are NOT Bank deposits, are NOT guaranteed by any Bank or any Bank affiliate, and MAY lose value, including possible loss of principal. Johnson Asset Management claims compliance with the Global Investment Performance Standards. The Institutional Core composite includes all fee paying, fully discretionary, actively managed institutional fixed income portfolios with a minimum value of $500,000 and an investment objective of broad investment grade, taxable fixed income, benchmarked against the Bloomberg U.S. Aggregate Index. The US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar denominated, fixed-rate taxable bond market. JAM’s policies for valuing portfolios, calculating performance and preparing compliant presentations, as well as a complete list of composite descriptions are available upon request. Please contact our office at 513.389.2770 or 3777 West Fork Road, Cincinnati, OH 45247. All returns reflect the reinvestment of investment income (dividends and/or interest) and capital gains. Valuations and returns are stated in U.S. dollars. Trade date accounting is used. Portfolio returns are calculated using time weighed return methodology on a monthly basis. Net returns shown reflect gross performance less the highest fee schedule for this strategy. Actual client returns would also be reduced by brokerage commissions, custodial fees, and other client paid expenses detailed in JIC’s Form ADV Part 2A.
