Summary
- Market Overview: The S&P 500 gained +2.7% in Q4, capping a strong year with continued multi-year double-digit returns.
- Sector Performance: Health Care, Communication Services, and Financials led, while Real Estate, Utilities, and Consumer Staples lagged.
- Performance: The Johnson Equity Income Strategy returned +2.4% net, modestly trailing the S&P 500.
- Attribution: Sector allocation detracted, primarily due to an underweight in Communication Services, while stock selection added value.
- Positioning: An underweight to Technology, along with overweights in Health Care and underweight to Real Estate, supported results.
- Concentration Impact: Elevated index concentration continues to influence relative returns, with selective exposure to mega-cap names creating both headwinds and benefits.
- Outlook: With valuations near historical highs and risk premiums compressed, the strategy remains focused on diversification, valuation discipline, and high-quality companies to protect and grow capital over time.
Video Transcript
Hello, I’m Charles Rinehart, portfolio manager for the Johnson Equity Income Strategy.
Thank you for joining us for our 4th quarter review.
The S&P 500 rose 2.7% during the fourth quarter, capping off a remarkable 2025—marking the third consecutive year of 15% or better returns for the index.
Performance across sectors was uneven.
The strongest performers were Health Care, up nearly 12%, followed by Communication Services, up just over 7%, and Financials, which gained about 2%.
On the other end of the spectrum, Real Estate declined roughly 2.5%, Utilities fell about 1.4%, and Consumer Staples finished essentially flat for the quarter.
Turning to performance, the Johnson Equity Income Strategy returned 2.4% net of fees, modestly trailing the S&P 500’s 2.7% gain during the quarter.
From an attribution standpoint, sector allocation was a drag, while stock selection added value.
Our largest allocation headwind came from being underweight Communication Services, which was the strongest-performing sector.
Importantly, that sector’s strength was driven largely by a single stock, which amplified the impact of our underweight.
Offsetting that somewhat, our significant underweight to Technology helped relative performance, reflecting the growing dispersion among the index’s largest constituents during 2025.
We also benefited from an overweight to Health Care, the best-performing sector, and an underweight to Real Estate, the worst-performing sector for the quarter.
It’s worth noting that the S&P 500 remains extraordinarily concentrated.
As a result, our more diversified portfolio construction means relative returns can be meaningfully impacted by structural underweights to the index’s largest names.
During the quarter, being underweight one of the large U.S. hyperscalers detracted from relative performance.
By contrast, we benefited from not owning two other hyperscalers, both of which posted double-digit declines.
The largest positive contributor for the quarter, however, was a recently added Consumer Discretionary holding in the restaurant industry, which performed very well.
Looking ahead, despite the market trading at roughly the same level it entered 2025, valuations today reflect very low perceived risk.
The forward P/E multiple on the S&P 500 is near all-time highs, meaning investors are currently being paid very little for taking on risk.
That said, the Federal Reserve’s rate cuts from last year should still be working their way through the economy and may prove supportive for earnings over time and, potentially, a broader market.
As always, we’ll continue to monitor market developments closely and adjust the portfolio as needed—while remaining anchored to our long-term objectives.
Those objectives are straightforward: protecting capital and enhancing its spending power over time.
We believe that a disciplined focus on valuation and quality remains the most effective way to pursue those goals, regardless of the market environment.
Thank you for watching, and as always, we appreciate your partnership.
Published 01/28/2026
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 September 30, 2025 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.
