Summary
- Market Backdrop: Q2 began with improving economic data, but sentiment reversed as geopolitical tensions and conflict in Iran drove higher energy prices and renewed inflation concerns.
- Rates & Policy: Interest rates rose—particularly on the short end—while the Fed paused rate cuts and adopted a wait-and-see approach.
- Performance: The Bloomberg Aggregate Index declined -0.05%, with the strategy trailing slightly by 2 bps net.
- Drivers: Duration and yield curve positioning were modest headwinds, largely offset by strong security selection.
- Credit & Risk: Despite a brief spread widening, valuations remain tight, supporting a cautious stance in credit amid consumer and labor market uncertainty.
- Outlook: Higher rates may present an attractive entry point for high-quality bonds, with the strategy maintaining a defensive, quality-focused approach in a volatile environment.
Video Transcript
Hello. I’m Brandon Zureick, Senior Managing Director at Johnson Asset Management.
The quarter started out on a positive note, with improving economic data and more balanced market performance.
That optimism faded quickly, however, as geopolitical tensions culminated in military action in Iran.
Energy prices surged, reigniting inflation concerns. As a result, interest rates rose – particularly on the short end of the yield curve – and stocks fell.
In response to these crosscurrents, the Federal Reserve paused further rate cuts and adopted a more patient, wait-and-see stance.
Against this backdrop, the Bloomberg Aggregate Bond Index finished the quarter down 5 basis points, while the Johnson Core Fixed Income Strategy trailed the Index by just two basis points net of fees.
While the Strategy’s duration and yield curve positioning were modest headwinds this quarter, security selection nearly offset those factors.
Looking forward, we continue to position portfolios conservatively.
Despite the brief, modest widening in credit spreads, valuation remains well below historical averages.
The conflict in Iran has also raised questions about the durability of the U.S. consumer in the face of sustained higher energy prices.
Taken in conjunction with continued moderation in the domestic labor market, we believe a more cautious position within credit remains warranted.
On the interest rate front, we acknowledge that the oil price spike may put temporary upward pressure on headline inflation but at the same time higher energy prices have traditionally acted to slow the consumer, thereby pressuring economic growth.
As a result, we believe that the recent back up in rates may be an attractive entry point for investors.
As always, we remain committed to delivering high-quality investment portfolios, meant to buffer economic and market volatility.
If you have any questions, please reach out to a member of the Johnson team.
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.
