Summary
- Performance: Johnson Equity Income returned 4.8% net of fees, trailing the S&P 500's 15.2% gain.
- Market Headwinds: Narrow, AI-driven technology leadership created challenges for diversified portfolios.
- Sector Impact: An underweight to Technology was the largest allocation detractor.
- Stock Selection: Limited exposure to top-performing semiconductor and hardware companies weighed on returns.
- Portfolio Strengths: Several holdings benefited from continued AI infrastructure investment.
- Outlook: The strategy remains focused on quality businesses, disciplined valuations, and long-term capital growth.
Video Transcript
Hello everyone, and thank you for joining us for our second quarter equity income composite review.
The second quarter was a sharp reversal from what we experienced earlier in the year.
The S&P 500 gained 15.2%, recovering from negative returns in the first quarter.
Several factors drove that rebound.
Energy prices declined as tensions surrounding Iran eased, while investor enthusiasm around artificial intelligence continued to accelerate.
In particular, supply constraints in areas like memory technology helped fuel strong performance across semiconductors and tech hardware.
As a result, market leadership shifted dramatically.
Technology was the standout performer, gaining nearly 32% during the quarter.
Industrials and REITs also posted strong results.
On the other hand, Energy was the weakest sector, declining more than 13%, while Utilities and Consumer Staples were essentially flat.
Turning to portfolio performance, the Johnson Equity Income Composite returned 4.8% net of fees during the quarter.
While that was a positive absolute return, it trailed the S&P 500's exceptionally strong gain.
The primary challenge was our positioning relative to the market's narrow leadership.
Technology was the only sector that outperformed the broader index, and our longstanding underweight to the sector was the largest allocation headwind.
Security selection also weighed on results.
Much of the market's strongest performance came from a relatively small group of high-beta semiconductor, memory, and hardware companies.
Our portfolio was underweight many of those names, which negatively impacted relative performance.
That said, it's important to note that many of our top contributors are also beneficiaries of continued AI infrastructure investment.
The difference is that they tend to operate businesses with more durable competitive advantages and less commodity-like characteristics than some of the market's recent leaders.
Looking ahead, we remain constructive on the overall market environment.
Manufacturing activity has strengthened meaningfully, and earnings growth is becoming broader across the economy.
At the same time, a relatively small group of semiconductor and hardware companies has driven a disproportionate share of market returns.
Historically, periods of narrow leadership often do not last forever.
Strong returns and elevated investment tend to attract additional capacity over time, which can ease supply bottlenecks and create opportunities for leadership to broaden.
As always, we will continue to monitor developments closely and make adjustments when appropriate.
Our long-term objectives remain unchanged: protecting capital while enhancing its spending power over time.
We believe a consistent focus on quality businesses, combined with a disciplined approach to valuation, remains the most effective way to achieve those goals across a variety of market environments.
Thank you for your continued confidence and trust.
We appreciate the partnership and look forward to updating you again next quarter.
Published 08/10/2026
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 June 30, 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 Investment Counsel claims compliance with the Global Investment Performance Standards. The Equity Income composite includes all fee paying, fully discretionary, actively managed equity portfolios with a minimum value of $500,000 and an investment objective of Equity Income, benchmarked against the S&P 500 Index. The S&P 500 Index is a broad-based flagship benchmark that measures the performance of the largest companies listed on US stock exchanges. JIC’s policies for valuing portfolios, calculating performance and preparing compliant presentations, as well as a complete list of composite descriptions are available upon request. GIPS® is a registered trademark of CFA Institute. CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein. 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.
