Summary
- Performance: SMID Cap Core returned 11.0% net of fees versus 20.0% for the Russell 2500 Index.
- Market Backdrop: SMID cap stocks reached new highs, led by AI-related technology companies.
- Style Headwinds: Lower quality, more cyclical stocks significantly outperformed quality-oriented businesses.
- Sector Impact: An underweight to Semiconductors and higher-quality positioning within Industrials and Health Care detracted.
- Portfolio Activity: New investments included a profitable biotech company and select data center beneficiaries.
- Outlook: The strategy remains focused on high-quality SMID-cap businesses with attractive long-term valuations.
Video Transcript
Hello, and thank you for joining us.
The second quarter was exceptionally strong for SMID-cap stocks, with the asset class reaching new all-time highs and posting its best quarterly return since 2020.
Earnings trends remained healthy, and analysts continue to raise future growth expectations.
At the same time, market leadership was extremely concentrated.
Technology stocks drove much of the market's advance as investors remained focused on AI and data center spending. Meanwhile, Energy lagged as oil prices moved lower.
Against that backdrop, the SMID Cap Core Strategy returned 11% net of fees during the quarter, compared with 20% for the Russell 2500 Index.
The key driver of that gap was the market's strong preference for risk.
Smaller, more cyclical, and lower-quality companies significantly outperformed, while our portfolio remains focused on high-quality businesses with strong balance sheets, durable earnings growth, and attractive profitability.
The narrowness of the rally also created challenges.
Our underweight exposure to Semiconductors, weighed on relative results, as did our higher-quality positioning within sectors such as Industrials and Health Care.
Historically, quality has been one of the most consistent drivers of excess returns over a full market cycle.
In fact, the recent drawdown in the quality factor is comparable to periods such as the late-90s technology bubble and the post-COVID rebound in 2020.
In both cases, market leadership eventually broadened, and quality stocks regained lost ground.
During the quarter, we were more active than usual as strong market performance changed valuation opportunities across the portfolio.
We added several new positions, including a profitable biotech company and select businesses benefiting from continued growth in data center investment.
As we look ahead, we're staying disciplined and focused on our process.
We believe today's environment presents a compelling opportunity to invest in high-quality small & mid cap businesses at attractive relative valuations.
We thank you for your interest in our strategy.
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 ?rm registered with the Securities and Exchange Commission. Johnson Asset Management manages institutional separate account portfolios for a wide variety of for-pro?t and nonpro?t 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 ?uctuate. 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 af?liate, and MAY lose value, including possible loss of principal. Johnson Asset Management claims compliance with the Global Investment Performance Standards (GIPS). 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. A complete list of ?rm composites and performance results and the policies for valuing portfolios, calculating performance, and preparing GIPS compliant presentations are available upon request by calling 513-389-2770. Composite: The Johnson SMID Cap Core Equity Composite was created on January 1, 2013, and includes all of JIC’s fee paying, fully discretionary institutional equity portfolios with a minimum of $1,000,000 and an investment objective of small and mid-cap equities. The benchmark for this composite is the Russell 2500, a broadly diversi?ed mid and small cap equity universe of U.S. companies. Eligible new portfolios are included in the composite the ?rst full month after being deemed fully invested. The returns from terminated portfolios are included prior to the date of termination. Effective January 2010, a portfolio will be temporarily removed from this composite if it experiences a net in?ow or out?ow of cash of 30% or more during a one-month period. Other than the futures contracts that are utilized to replicate the S&P 500, no leverage is used in the Composite portfolios. Portfolios in this composite include cash, cash equivalents, investment securities, interest and dividends. The U.S. dollar is the base currency. All returns re?ect 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 re?ect gross performance less the highest fee schedule for this strategy. The highest investment management fee schedule for this strategy is 1.00%. Actual client returns could also be reduced by brokerage commissions, custodial fees, and other client paid expenses detailed in JIC’s Form ADV Part 2A.
