Summary
- Performance: Johnson Core Fixed Income gained 2.01% net of fees in Q3, performing in line with the Bloomberg Aggregate Bond Index.
- Market Backdrop: A well-telegraphed September Fed rate cut led to muted interest rate moves, confirming expectations were largely priced in.
- Credit Conditions: Credit spreads tightened approximately 10 basis points and remain near multi-decade lows, supporting bond returns.
- Sector Impact: Sector positioning added value, but this was largely offset by a quality tilt that lagged lower-quality, more cyclical bonds.
- Style Effect: Emphasis on higher-quality bonds trailed riskier segments that led performance during the quarter.
- Outlook: Looking ahead, markets remain focused on Federal Reserve policy, with future rate decisions hinging on the balance between labor market softness and tariff-driven inflation pressures.
Video Transcript
Hi everyone — I’m Brandon Zureick, Senior Managing Director at Johnson Asset Management.
It was a pretty quiet quarter in the bond market, even with the Fed restarting its rate-cut campaign in September.
Interest rates reacted very modestly to the Fed’s announcement, evidence that the Fed’s September cut was already priced in.
Credit spreads tightened about 10 basis points and are now sitting near multi-decade lows.
The Bloomberg Aggregate Bond Index gained just over 2% for the quarter, wrapping up the best three-quarter start to a year since 2020.
Our Johnson Core Fixed Income Strategy performed in line with the benchmark — up 2.01% net of fees.
Sector positioning was additive but was mostly offset by our focus on higher-quality bonds, which trailed the more cyclical, lower-quality names that led the way this quarter.
Looking ahead to the final stretch of the year, all eyes remain on the Fed.
The market’s currently pricing in a year-end Fed Funds rate around 3.63%, matching the Fed’s own 2025 projection.
From here, the balance between a softer labor market and tariff-related inflation pressures will likely determine what’s next for monetary policy.
As always, if you have any questions, don’t hesitate to reach out to anyone on the Johnson team.
Thanks for watching.
Published 10/21/2025
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.
