A Quarter Review
The S&P 500 increased +15.2% during the second quarter, a sharp contrast to the first quarter’s negative total returns. The reversal was driven by a retreat in energy prices following a de-escalation of the Iran conflict, as well as continued enthusiasm surrounding artificial intelligence infrastructure investment and the emergence of new supply bottlenecks (i.e., memory).
As a result, sector leadership reversed course in the second quarter. For the full quarter, the top performing sectors were Technology (+31.8%), Industrials (+14.9%), and REITs (+9.5%). The worst performing sectors were Energy (-13.4%), Utilities (-0.5%), and Consumer Staples (+0.3%).
Performance Summary
The Johnson Equity Income Composite posted a return of +4.8%, net of fees, underperforming the aforementioned +15.2% return of the S&P 500 in the second quarter. Sector positioning was broadly negative, largely reflecting the S&P 500’s narrow leadership. Notably, Technology was the only sector to outperform the S&P 500 during the quarter, and the Composite's large underweight to the sector represented the primary allocation headwind. Impacts from the other sector positioning decisions were de minimis in comparison.
Security selection was a larger headwind to relative performance during the quarter, with the largest drags stemming from high beta companies across semiconductor, memory, and other related hardware industries. The portfolio's relative underweight to these names weighed heavily on relative performance during the quarter. Importantly, many of the Composite’s strongest contributors also stand to benefit from continued artificial intelligence infrastructure investment, albeit through business models with less historically commodity-like characteristics.
1) Past performance is not indicative of future results, and there is a risk of loss of all or part of your investment. The above does not represent all holdings in the Strategy. Holdings listed might not have been held for the full period. To obtain a copy of Johnson Asset Management’s calculation methodology and a list of all holdings with contribution analysis, please contact your service team. The data provided is supplemental. Please see important disclosures at the end of this document.
2) Holdings are subject to change. Past performance is not indicative of future results, and there is risk of loss of all or part of your investment. The data provided is supplemental. Please see disclosures at the end of this document
Market Outlook and Portfolio Positioning
As we look ahead, the backdrop remains constructive. Manufacturing activity has reached its strongest level in years, which has coincided with a broadening of earnings growth. At the same time, leadership within the S&P 500 remains highly concentrated. Supply constraints and robust demand have driven exceptional performance among a relatively small group of semiconductor and hardware companies, while many high-quality businesses outside of those areas have generated far more modest returns. History suggests that periods of narrow leadership are often temporary as elevated investment ultimately attracts additional capacity, easing bottlenecks, and creating opportunities for leadership to broaden over time. We will continue to monitor market developments closely and adjust accordingly to align with our long-term objectives. Those objectives are a focus on capital protection as well as enhancing the spending power of capital over time. We view the combination of a consistent valuation discipline and quality focus as the best means to reach those aims, regardless of the prevailing market environment.
The Johnson Equity Income Strategy seeks to outperform the S&P 500 over a full market cycle with a disciplined quality framework that provides investors with long-term capital growth, above average shareholder yield and reduced volatility through downside protection. For more information on our products and services, please contact a member of our Sales & Client Service Team at 513.389.2770 or info@johnsonasset.com.
Published 07/27/2026
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 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.
