Our Perspective on Industry News and Trends

We are at a historically vulnerable point in the economic cycle, where restrictive policy leaves the economy susceptible to unexpected shocks. Current data are encouraging and suggest a return to normalcy may be on the horizon. However, the market's optimism presents heightened risks if future data disappoint. Inflation, a key variable for policy decisions, remains higher than desired. We remain in an extended state of limbo. We cannot declare an all-clear until monetary policy changes, but we shouldn’t be overly concerned if the labor market remains steady.

A focus on investing in quality companies sounds good, but what does that actually mean in practice?  In this paper, Managing Director of Research & Senior Portfolio Manager Brian Kute, CFA, Lead PM on Johnson’s SMID Cap Core strategy and the Johnson Opportunity Fund (JOPPX), defines what quality means for Johnson Asset Management and explains how our research team identifies high-quality companies in the SMID Cap space.  He also demonstrates that a focus on high-quality stocks has historically provided long-term outperformance with downside protection and reduced volatility.

Successful investing is as much about temperament as it is about analysis. Often quoted legend of value investing, Ben Graham, cited erratic behavior as a source of many of the opportunities and dangers that emerge for investors. Graham personified the market as a symbolic trading partner, “Mr. Market.” People say that Mr. Market is sometimes greedy and sometimes fearful. Last year he couldn’t make up his mind.

This year's market has felt more like that maze with each passing quarter. The initial wide-eyed enthusiasm and AI-driven investing in the first half of the year has been
replaced by a range of worries. Labor strikes, the resumption of student loan payments, and potential government shutdowns have dominated the financial news cycle. Inflation concerns, a growing deficit, and Fed policy loom large, pushing interest rates higher and bringing volatility back to the stock and bond markets. In the midst of all this, I thought the best use of this quarter's newsletter would be to zoom out and take a fresh look at the map.

The S&P 500 is up over 20% from the lows it set last October. All in all, I’d say the year so far has been off to a surprisingly pleasant start. The 2023 economic environment has hardly been a walk in the park. We’ve seen the Leading Economic Index continues to fall. The current reading, -7.9%, is a level which has preceded or coincided with the recession, without fail, going back at least 30 years

The S&P 500 gained 7% in the first quarter despite banking sector turmoil and economic anxiety. In typical fashion, early action reflected a reversal from themes that drove last year’s markets. The tech sector showed significant strength after taking a massive hit in 2022. Read Johnson Investment Counsel's 1Q2023 Quarterly Insight newsletter including a Market Update, JIC Blog: Interest Rates and Asset Allocation, and other JIC news.

After several years of pandemic impact on our daily lives, we’ve all been longing for a return to normalcy. 2022 was anything but normal—with a bear market in stocks, the worst bond market since the 18th century, and inflation levels not seen since the early 80s. Read Johnson Investment Counsel's 4Q2022 Quarterly Insight newsletter including a letter from CEO Jason Jackman, a Market Update, and other JIC news. 

Market conditions deteriorated in the third quarter as inflation remained stubbornly high and the Federal Reserve aggressively fought against it. After 1.50% of rate hikes in the first half of 2022, the Fed raised interest rates twice more in July and September, each time by 0.75%, jarring stocks and sending bond yields higher.

With the S&P 500 Index officially falling into bear market territory and stocks and bonds falling in tandem, market volatility remains a clear theme in the second quarter of 2022. For our 2022 Second Quarter Newsletter, we share our thought process and the methodology behind the philosophy that drives our Equity Income strategy. We discuss why quality matters, and what Johnson evaluates as quality, in times of market volatility. 

Stock and bond markets were dragged down in the first quarter by a powerful combination of rising inflation, the Russia-Ukraine war, and tightening Fed policy. Any one of these could have been the sole catalyst for a market downturn, and together they led to broad weakness across asset classes. Read more in this Market Update in our 1Q 2022 Quarterly Insight Newsletter.

We entered last year with the possibility of a return to normalcy, but 2021 was anything but normal. Our job is to navigate all of this on your behalf while instilling financial peace of mind. Our people are committed to delivering on this mission throughout your life’s journey. Read the 4Q2021 newsletter for a look back at the markets and economy and read President Jason Jackman's annual letter.

A choppy September offset gains in July and August, resulting in flattish third quarter returns for U.S. stocks. Read more of this Market Update and other news in our 3Q2021 Quarterly Insight Newsletter.

David Theobald, CFA, Senior Portfolio Manager in our Asset Management division has authored a white paper examining how a diversified portfolio of high-quality short-term bonds can out-earn cash without taking unnecessary risks.

Economic activity picked up steam as more people were vaccinated and as government restrictions were lifted. It became evident that consumers worldwide were anxious to return to normal. Strange market dynamics, including supply chain bottlenecks and shortages, made more headlines as the fallout from the worldwide shutdown last year continued. Read more of this Market Update in the 2Q Quarterly Insight.