# EDGAR Filing Document

**Accession Number:** 0000892657
**File Stem:** 0001104659-23-007744
**Filing Date:** 2023-1
**Character Count:** 44644
**Document Hash:** 2bf0bc96b1d76470cb7198df160ffb60
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001104659-23-007744.hdr.sgml**: 20230130

**ACCESSION NUMBER**: 0001104659-23-007744

**CONFORMED SUBMISSION TYPE**: 497AD

**PUBLIC DOCUMENT COUNT**: 1

**FILED AS OF DATE**: 20230130

**DATE AS OF CHANGE**: 20230130

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** JOHNSON MUTUAL FUNDS TRUST
- **CENTRAL INDEX KEY:** 0000892657
- **IRS NUMBER:** 316455344
- **STATE OF INCORPORATION:** OH
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 497AD
- **SEC ACT:** 1933 Act
- **SEC FILE NUMBER:** 033-52970
- **FILM NUMBER:** 23565375

**BUSINESS ADDRESS:**
- **STREET 1:** 3777 WEST FORK ROAD
- **CITY:** CINCINNATI
- **STATE:** OH
- **ZIP:** 45247
- **BUSINESS PHONE:** 5136613100

**MAIL ADDRESS:**
- **STREET 1:** JOHNSON MUTUAL FUNDS TRUST
- **STREET 2:** 3777 WEST FORK ROAD
- **CITY:** CINCINNATI
- **STATE:** OH
- **ZIP:** 45247

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** JOHNSON INVESTMENT MUTUAL FUNDS TRUST
- **DATE OF NAME CHANGE:** 19930328

## Series and Classes Contracts Data

### Johnson Equity Income Fund (Series ID: S000005714)

| Class ID   | Class Name                 | Ticker Symbol   |
|:---|:---|:---|
| C000015708 | Johnson Equity Income Fund | JEQIX           |

### Johnson Opportunity Fund (Series ID: S000005718)

| Class ID   | Class Name               | Ticker Symbol   |
|:---|:---|:---|
| C000015712 | Johnson Opportunity Fund | JOPPX           |

### Johnson Fixed Income Fund (Series ID: S000005720)

| Class ID   | Class Name                | Ticker Symbol   |
|:---|:---|:---|
| C000015714 | Johnson Fixed Income Fund | JFINX           |

### Johnson Municipal Income Fund (Series ID: S000005721)

| Class ID   | Class Name                    | Ticker Symbol   |
|:---|:---|:---|
| C000015715 | Johnson Municipal Income Fund | JMUNX           |

### Johnson International Fund (Series ID: S000024217)

| Class ID   | Class Name                 | Ticker Symbol   |
|:---|:---|:---|
| C000071343 | Johnson International Fund | JINTX           |

### Attached PDF Documents

**Attachment 1:** `tm234634d2_497ad.pdf`

Filed Pursuant to Rule 497(a)
File No. 033-52970
Rule 482ad

JOHNSON
INVESTMENT COUNSEL

# PORTFOLIO CONSTRUCTION &
ASSET ALLOCATION

FOURTH QUARTER 2022

This presentation is confidential. It is intended only for the person to whom it has been directly provided and under no circumstances may a copy be shown, copied, transmitted or otherwise be given to any person other than the authorized recipient without Johnson Investment Counsel's prior consent.

![Johnson Investment Counsel logo]() JOHNSON  
INVESTMENT COUNSEL

# OUR PHILOSOPHY

JOHNSON
INVESTMENT COUNSEL

# OUR INVESTMENT MANAGEMENT RESPONSIBILITY

- Be prudent stewards of our clients’ capital
- Preserve and build wealth over time
- Maximize total returns at an acceptable level of risk
- Never risk everything on any one market forecast

1. We focus on long-term performance
2. We will not outperform every year
3. The key to #1 is being prepared for #2

2

JOHNSON
INVESTMENT COUNSEL

# THE STOCK MARKET IS RELIABLY POSITIVE OVER THE LONG-TERM

- Market returns vary widely in the short-term but become more predictable over long periods.
- Maintaining a long-term focus reduces the risk of negative returns. There has never been a negative 30-year period for the S&P 500.

Distribution of Stock Market Returns Since 1950

![img-0.jpeg](img-0.jpeg)

SOURCE: BLOOMBERG, DATA AS OF 12/31/2021

3

JOHNSON
INVESTMENT COUNSEL

# TO PARTICIPATE IN LONG-TERM RETURNS, INVESTORS MUST
SUCCESSFULLY NAVIGATE MARKET DRAWDOWNS

- Despite an average positive return of 11.4% per year, the average intra-year decline of the S&P 500 is 14%.
- On average, a 10% or greater decline in the S&P 500 occurs every 19 months.

Stock Market Performance vs. Intra-Year Declines

![img-1.jpeg](img-1.jpeg)

SOURCE: BLOOMBERG, DATA AS OF 12/31/2020

4

JOHNSON
INVESTMENT COUNSEL

# MARKET TIMING IS NOT A RELIABLE RISK MITIGATION TOOL

- Attempting to time the market is difficult and dangerous.
- Successfully timing the market requires both a well-timed exit and a well-timed re-entry.
- Missing out on the late stages of a bull market can be more costly than participating in a bear market.

Median Return Leading Up To and Following Equity Market Peaks

![img-2.jpeg](img-2.jpeg)

SOURCE: BLOOMBERG, DATA AS OF 12/31/2021

NOTE: CHART IS BASED ON RETURN DATA FROM 9 BEAR MARKETS FROM 1950-2022. A BEAR MARKET IS DEFINED AS A DECLINE OF 20% OR MORE IN THE S&P 500 BENCHMARK PRICE.

5

JOHNSON
INVESTMENT COUNSEL

# THE BEST PATH TO RELIABLE DOWNSIDE PROTECTION IS THROUGH OWNING HIGH QUALITY SECURITIES

- A better approach to managing risk in portfolios is owning highquality securities throughout the cycle.
- The timing of market declines is unpredictable, but the relative performance of the best securities in a downturn is consistent.

Performance During 10 Worst Quarters Since 2006

On average, the Johnson 60/40 portfolio has outperformed by 122 bps during turbulent quarters.

![img-3.jpeg](img-3.jpeg)

SOURCE: ZEPHYR DATA AS OF 12/31/2022

NOTE: JOHNSON 60/40 PORTFOLIO MADE UP OF JEQIX AND JIBFX, MARKET INDEX MADE UP OF S&P 500 AND BLOOMBERG US AGGREGATE; INFORMATION ABOUT INDICES IS PROVIDED TO ALLOW FOR COMPARISON OF THE PERFORMANCE OF JOHNSON PORTFOLIO TO THAT OF THE MARKET INDEX MADE UP OF S&P500 AND BLOOMBERG US AGGREGATE. THERE IS NO REPRESENTATION THAT SUCH INDICES ARE AN APPROPRIATE BENCHMARK FOR SUCH COMPARISON. YOU CANNOT INVEST DIRECTLY IN AN INDEX, WHICH ALSO DOES NOT TAKE INTO ACCOUNT TRADING COMMISSIONS AND COSTS. THE VOLATILITY OF INDICES MAY BE MATERIALLY DIFFERENT FROM THE PERFORMANCE OF THE JOHNSON PORTFOLIO. IN ADDITION, JOHNSON'S RECOMMENDATIONS MAY DIFFER SIGNIFICANTLY FROM THE SECURITIES THAT COMPRISE THE INDICES.

6

JOHNSON
INVESTMENT COUNSEL

# QUALITY SECURITIES ALLOW FOR A GROWTH-ORIENTED ASSET ALLOCATION

- Asset allocation is a key driver of long-term investor success.
- By reducing risk through the ownership of high-quality securities, investors can maintain a higher allocation to the stock market over time.

![img-4.jpeg](img-4.jpeg)

![img-5.jpeg](img-5.jpeg)

Quality securities provide downside protection in the worst market environments.

|  | Return | Standard Deviation | Sharpe Ratio | Max Drawdown |
| --- | --- | --- | --- | --- |
| Johnson 60/40 Portfolio (Net) | 7.30% | 9.16% | 0.67 | -26.38% |
| Johnson 63/37 Portfolio (Net) | 7.46% | 9.55% | 0.66 | -27.78% |
| Market Index 60/40 Portfolio | 6.87% | 9.71% | 0.59 | -32.54% |

SOURCE: ZEPHYR DATA AS OF 12/31/2022

NOTE: JOHNSON PORTFOLIOS MADE UP OF JEQIX AND JIBFX, MARKET INDEX PORTFOLIO MADE UP OF S&P500 AND BLOOMBERG US AGGREGATE INDEX; RETURN SEQUENCE FROM 1/1/2006 (JEQIX INCEPTION) TO 6/30/2021; INFORMATION ABOUT INDICES IS PROVIDED TO ALLOW FOR COMPARISON OF THE PERFORMANCE OF JOHNSON PORTFOLIO TO THAT OF THE MARKET INDEX MADE UP OF S&P500 AND BLOOMBERG US AGGREGATE. THERE IS NO REPRESENTATION THAT SUCH INDICES ARE AN APPROPRIATE BENCHMARK FOR SUCH COMPARISON. YOU CANNOT INVEST DIRECTLY IN AN INDEX, WHICH ALSO DOES NOT TAKE INTO ACCOUNT TRADING COMMISSIONS AND COSTS. THE VOLATILITY OF INDICES MAY BE MATERIALLY DIFFERENT FROM THE PERFORMANCE OF THE JOHNSON PORTFOLIO. IN ADDITION, JOHNSON'S RECOMMENDATIONS MAY DIFFER SIGNIFICANTLY FROM THE SECURITIES THAT COMPRISE THE INDICES.

7

JOHNSON
INVESTMENT COUNSEL

# RECESSIONARY MARKET DECLINES WARRANT ADDITIONAL RISK CONTROL

- In most environments, quality securities give sufficient protection to weather difficult markets.
- Not all volatility is the same; recessions lead to bear markets.
- Recessionary periods have historically been much more detrimental to portfolios and warrant adjustments at the asset allocation level.

Historically, recessionary drawdowns have been much more severe than non-recessionary market pullbacks.

![img-6.jpeg](img-6.jpeg)

![img-7.jpeg](img-7.jpeg)

SOURCE: BLOOMBERG, JOHNSON ASSET MANAGEMENT; S&P 500 PERFORMANCE DATA FROM 12/31/1965 - 12/31/2021

8

JOHNSON
INVESTMENT COUNSEL

# RECESSIONS ARE UNPREDICTABLE, BUT THERE ARE NORMALLY WARNING SIGNS

- We monitor economic data to determine when recessions are more likely; our proprietary multifactor model has been a strong indicator of recession risk.
- When market volatility increases in tandem with recession risk, we are likely to move more conservative in asset allocation.

Johnson Asset Management Recession Probability Model

![img-8.jpeg](img-8.jpeg)

SOURCE: BLOOMBERG, JOHNSON ASSET MANAGEMENT, DATA AS OF 12/31/2022 (SOME MODEL INPUTS AS OF 11/30/2022).

9

![Johnson Investment Counsel logo]() JOHNSON  
INVESTMENT COUNSEL

# OUR PROCESS

JOHNSON
INVESTMENT COUNSEL

# JOHNSON INVESTMENT RESEARCH TEAMS

# Portfolio Strategy Team

- Charles Rinehart, CFA, CAIA, Chief Investment Officer
- Michael Leisring, CFA, Chief Investment Officer - Fixed Income
- Jason Jackman, CFA, President - Johnson Investment Counsel
- Bret Parrish, CFA, President - JiC Private Client Group
- Fred Brink, CFA, CFP®, President - Johnson Asset Management
- Brian Kute, CFA, Director of Research
- Michael Jordan, CFA, CFP®, Managing Director
- Chad Maggard, CFA, Managing Director

# Individual Stock Selection

Brian Kute, CFA
Charles Rinehart, CFA, CAIA
Bryan Andress, CFA
Chris Godby, CFA
Bill Jung, CFA
Bret Parrish, CFA
Joe Abbott, CFA
Eric Bachus, CFA
Zach Berohn
Chris Gray

# Research Strategy Teams

| Equity |  | Fixed Income |
| --- | --- | --- |
| Charles Rinehart, CFA, CAIA | Bill Jung, CFA - Large Cap | Michael Leisring, CFA |
| Brandon Zureick, CFA - Economics | Joe Abbott, CFA - International | Jason Jackman, CFA |
| Max Monk, CFA - Infrastructure | David Christian CFA, CFP® - Portfolio Construction | Ryan Martin, CFA |
| Emilia Connor-Brady, CFA - Private Assets | Alex Wertz, CFP® - Communications | David Theobald, CFA |
| Michael Timm, CFA, CFP® - Private Assets | Landon Peterson - Communications | Brandon Zureick, CFA |
| Eric Bachus, CFA - Portfolio Construction |  | Emilia Connor-Brady, CFA |
|  |  | Kristen Curtiss, CFA |
|  |  | Alex Wirt, CFP® |

11

JOHNSON
INVESTMENT COUNSEL

# OUR PORTFOLIO CONSTRUCTION PROCESS

- Before any investment is made, it moves through a multi-step process guided by our investment discipline.
- Our team-based approach enables our Portfolio Managers to tailor our institutional investment research to accomplish your personalized goals.

![img-0.jpeg](img-0.jpeg)

12

JOHNSON
INVESTMENT COUNSEL

# JOHNSON ASSET MANAGEMENT AWARD WINNING FUNDS

Johnson has had multiple funds win Lipper awards for strong performance in their respective peer groups.

- The Johnson Equity Income Fund is a 2021 winner of the Refinitiv Lipper Fund Award for “Best Fund over 5 Years” for Equity Income Funds.
- The Johnson Institutional Intermediate Bond Fund is a 2021 winner of the Refinitiv Lipper Fund Award for “Best fund over 3 years” AND “Best fund over 5 years” for Institutional Mutual Funds.

These honors are given to individual mutual funds that have outperformed peers based on risk-adjusted, consistent returns over three-, five-, and ten-years relative to their peers. Refinitiv Lipper designates award-winning funds in most individual classifications for the three-, five-, and ten-year periods.

![img-1.jpeg](img-1.jpeg)

NOTE: THE DEFINITIV LIPPER FUND AWARDS, GRANTED ANNUALLY, HIGHLIGHT FUNDS AND FUND COMPANIES THAT HAVE EXCELLED IN DELIVERING CONSISTENTLY STRONG RISK-ADJUSTED PERFORMANCE RELATIVE TO THEIR PEERS. THE DEFINITIV LIPPER FUND AWARDS ARE BASED ON THE LIPPER LEADER FOR CONSISTENT RETURN RATING, WHICH IS A RISK-ADJUSTED PERFORMANCE MEASURE CALCULATED OVER 36, 60 AND 120 MONTHS. THE FUND WITH THE HIGHEST LIPPER LEADER FOR CONSISTENT RETURN (EFFECTIVE RETURN) VALUE IN EACH ELIGIBLE CLASSIFICATION WINS THE DEFINITIV LIPPER FUND AWARD. FOR MORE INFORMATION, SEE LIPPERFUNDAWARDS.COM. ALTHOUGH DEFINITIV LIPPER MAKES REASONABLE EFFORTS TO ENSURE THE ACCURACY AND RELIABILITY OF THE DATA CONTAINED HEREIN, THE ACCURACY IS NOT GUARANTEED BY DEFINITIV LIPPER. THE AWARD MAY NOT BE REPRESENTATIVE OF EVERY CLIENT'S EXPERIENCE. THE AWARD IS NOT INDICATIVE OF FUTURE PERFORMANCE AND THERE IS NO GUARANTEE OF FUTURE INVESTMENT SUCCESS.

13

JOHNSON
INVESTMENT COUNSEL

# THOROUGH OUTSIDE MANAGER DUE DILIGENCE

- We are committed to providing best-in-class investment solutions to our clients, whether internally or externally managed.
- We apply the same quality-oriented investment discipline to our evaluation of external partners.
- Our portfolio strategy team follows an analytical screening process which identifies the world's best investment managers through a mixture of quantitative screening and qualitative analysis.
- We maintain total independence throughout due diligence and monitoring process.

Capital Market Expectations

- Independent analysis helps us identify the most attractive markets and asset classes around the globe
- When our capital market expectations highlight an opportunity, we survey the entire landscape of both internal and external capabilities to provide best-in-class teams that will implement our ideas

Quantitative Screening

- We search multiple databases for the managers with the best track records
- Performance is measured on a risk-adjusted basis vs the benchmark
- We prioritize managers that consistently deliver on expectations and exclude those with a few good years of outsized results

Qualitative Due Diligence

- We conduct multiple rounds of interviews with portfolio managers and research analysts investigating investment philosophy, firm culture, portfolio construction, industry experience and incentive structures
- We emphasize consistent investment disciplines and repeatable processes over year-to-year results

Portfolio Monitoring

- We review external factors such as general economic indicators and financial markets to ensure the manager's performance is consistent with our expectations
- We continue to monitor the manager's investment process to ensure decisions are compatible with client objectives

Our scale enables us to provide favorable terms for our clients when making fund selection decisions

14

JOHNSON
INVESTMENT COUNSEL

# SAMPLE PORTFOLIO: IN-HOUSE VS. EXTERNALLY MANAGED

- We leverage a combination of our in-house asset management expertise as well as best in class external managers, leveraging our firm scale for cost savings and portfolio efficiency.
- Our internal capabilities ensure a single fee layer for the majority of the portfolio.

![img-2.jpeg](img-2.jpeg)

15

JOHNSON
INVESTMENT COUNSEL

# MARKET OUTLOOK
JANUARY 2023

![img-3.jpeg](img-3.jpeg)

JOHNSON
INVESTMENT COUNSEL

# MARKET AND ECONOMIC OVERVIEW

- Investors will look back on 2022 as a historic year in the markets. In fact, 2022 marked the worst year in recorded history for the U.S. bond market and the 7th worst year for the U.S. stock market. While Q4 saw both stocks and bonds rally, the S&P 500 ended 2022 down -18.11% and the Bloomberg US Aggregate index finished down an astonishing -13.01%. As a result, 2022 was the worst year since 2008 for the "60/40 portfolio".
- The primary driver of markets throughout 2022 was the extraordinary pace at which the Federal Reserve embarked upon hiking interest rates. Entering the year, economists estimated the Fed might hike anywhere from one to five 25 bps increments, however the Fed Funds rate ended 2022 at 4.25%, equivalent to seventeen 25 Bps hikes during the year. The Fed was forced to take such dramatic action by continuing elevated and persistent inflation levels. Headline CPI peaked at 9% year-over-year in June, while Core CPI reached 6.7% in September, their highest levels in decades. Both measures did begin to cool in Q4 with Headline falling to 6.5% and Core to 5.7% by the end of the year. While there are signs inflation is falling, overall levels remain much higher than the Fed's 2.0% target and will take time to move toward that level. The tenor of the discussion around inflation has turned from how aggressively the Fed will continue, to when the Fed might pause or stop raising interest rates, as the market now expects a lower terminal rate than the Fed itself forecasts.
- As the effects of policy tightening settle in, leading economic indicators are flashing warning signs. The housing market has slowed to levels not seen since the 2008 financial crisis, and the Conference Board LEI measure fell -4.5% in November. While leading economic activity measures are slowing dramatically, the labor market remains relatively stable. Job openings have come down and employment numbers are slowing, however the Fed continues to look at labor tightness as a sign that the economy can handle an ongoing restrictive policy stance. That said, the lagged effects of monetary tightening continue to work their way through the economy, and we are watching closely for signs of further slowdown.
- Rising interest rates had cascading effects across financial markets in 2022. The stock market had a roller coaster year, primarily driven by the contraction in price multiples. Higher valuation growth stocks were hit hard, with many of the pandemic era darling stocks down well over 50% from their highs. The Energy sector was the loan standout, returning over 60% with higher oil prices and energy scarcity in 2022. While equity market performance was driven by multiple contraction, high nominal growth was a tailwind for corporate earnings, which were positive for the year. We are monitoring fundamental economic activity and individual company guidance closely, as 2023 earnings estimates are being revised lower.
- The dramatic increase in interest rates, both in level and rate of change, ravaged Fixed Income markets in 2022. Starting from historically low yield levels, bonds had very little income generation to shield portfolios from the negative price returns that result from higher rates. There was no place to hide as U.S. treasuries, investment grade corporates, and high yield all saw double digit negative returns. That said, the outlook for Fixed Income returns has improved dramatically as higher rates are beneficial to long-term investors. Because income is the primary driver of returns in a bond portfolio, the self-healing nature of bonds grows with portfolio yields, setting fixed income markets up to see stronger returns going forward. Additionally, Johnson's quality-focused credit selection process remains important in navigating markets with significant uncertainty around the economy and markets ahead.
- 2022 was undoubtedly a challenging year for investment portfolios, as asset allocation did not provide the benefit that we have come to expect over the history of markets. It is in times like these that we lean on the principles of our quality-oriented investment discipline to provide clients with peace of mind. 2022 was a reminder that quality security selection can provide relative downside protection in even the most difficult markets. As we continue to monitor markets and economic activity, we remain committed to that discipline across asset classes.

17

![Johnson Investment Counsel logo]() JOHNSON  
INVESTMENT COUNSEL

# PART I: WHAT HAPPENED LAST YEAR?

**JOHNSON**^{}[] INVESTMENT COUNSEL

## ANNUAL RETURNS BY ASSET CLASS

| 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Small Cap 38.82% | Real Estate 27.24% | Real Estate 2.14% | Small Cap 21.31% | International Equities 27.19% | Cash 1.83% | Large Cap 31.49% | Small Cap 19.96% | Real Estate 38.99% | Commodities 16.01% |
| Large Cap 32.39% | Infrastructure 17.16% | Large Cap 1.38% | High Yield 17.13% | Large Cap 21.83% | Fixed Income 0.01% | Infrastructure 29.84% | Large Cap 18.40% | Large Cap 28.71% | Cash 1.52% |
| Infrastructure 16.75% | Large Cap 13.69% | Balanced Benchmark 0.58% | Infrastructure 13.45% | Infrastructure 16.74% | High Yield -2.08% | Real Estate 28.92% | Balanced Benchmark 13.98% | Commodities 27.11% | Infrastructure -5.81% |
| Balanced Benchmark 15.96% | Balanced Benchmark 8.80% | Fixed Income 0.55% | Large Cap 11.96% | Balanced Benchmark 14.71% | Balanced Benchmark -3.39% | Small Cap 25.52% | International Equities 10.65% | Infrastructure 20.86% | High Yield -11.19% |
| International Equities 15.29% | Fixed Income 5.97% | Cash 0.03% | Commodities 11.77% | Small Cap 14.65% | Real Estate -4.03% | International Equities 21.51% | Fixed Income 7.51% | Small Cap 14.82% | Fixed Income -13.01% |
| High Yield 7.44% | Small Cap 4.89% | Small Cap -4.41% | Balanced Benchmark 7.59% | Real Estate 9.84% | Large Cap -4.38% | Balanced Benchmark 21.22% | High Yield 7.11% | Balanced Benchmark 13.83% | Balanced Benchmark -15.28% |
| Real Estate 1.77% | High Yield 2.45% | High Yield -4.47% | Real Estate 7.56% | High Yield 7.50% | Infrastructure -7.04% | High Yield 14.32% | Cash 0.54% | International Equities 7.82% | International Equities -16.00% |
| Cash 0.05% | Cash 0.03% | International Equities -5.66% | International Equities 4.50% | Fixed Income 3.54% | Small Cap -11.01% | Fixed Income 8.72% | Commodities -3.12% | High Yield 5.28% | Large Cap -18.13% |
| Fixed Income -2.02% | International Equities -3.87% | Infrastructure -16.67% | Fixed Income 2.65% | Commodities 1.70% | Commodities -11.25% | Commodities 7.69% | Real Estate -5.29% | Cash 0.04% | Small Cap -20.46% |
| Commodities -9.52% | Commodities -17.01% | Commodities -24.66% | Cash 0.26% | Cash 0.81% | International Equities -14.20% | Cash 2.21% | Infrastructure -6.17% | Fixed Income -1.54% | Real Estate -25.23% |

SOURCE: BLOOMBERG DATA THROUGH 12/31/2022

BALANCED BENCHMARK = 50% S&P 500, 10% MSCI ACWI EX US, 40% BLOOMBERG US AGGREGATE; SMALL CAP = RUSSELL 2000; LARGE CAP = S&P 500; INTERNATIONAL EQUITIES = MSCI ACWI EX US; HIGH YIELD = BLOOMBERG US HIGH YIELD; REAL ESTATE = DOW JONES US REAL ESTATE; CASH = BLOOMBERG 1-3 MO. T-BILL; FIXED INCOME = BLOOMBERG US AGGREGATE; COMMODITIES = BLOOMBERG COMMODITIES INDEX; INFRASTRUCTURE = DOW JONES BROOKFIELD GLOBAL INFRASTRUCTURE.

19

JOHNSON
INVESTMENT COUNSEL

# ELEVATED INFLATION CONTINUED IN 2022

U.S. Consumer Price Index (CPI)

Inflation was a critical driver of financial markets in 2022. Headline inflation peaked at 9% in June, the highest level since 1982.

![img-0.jpeg](img-0.jpeg)

SOURCE: BLOOMBERG DATA AS OF 12/31/2022

20

JOHNSON
INVESTMENT COUNSEL

# INTEREST RATES MOVED MEANINGFULLY HIGHER

US Treasury Yields

![img-1.jpeg](img-1.jpeg)

UST Yield Curve

![img-2.jpeg](img-2.jpeg)

SOURCE: BLOOMBERG DATA AS OF 12/31/2022

21

JOHNSON
INVESTMENT COUNSEL

# RISING RATES LED TO A CHALLENGING YEAR FOR BONDS

Bloomberg US Aggregate Index

![img-3.jpeg](img-3.jpeg)

As interest rates rise bond prices fall, leading to negative total returns. Prior to 2022, the worst total return year for the U.S. bond market was -2.92% in 1994. The bond market fell -13.0%, making it the worst year on record.

SOURCE: BLOOMBERG DATA AS OF 12/31/2022

22

JOHNSON
INVESTMENT COUNSEL

# WORST YEAR FOR U.S. TREASURIES LOOKING BACK TO 1926

![img-4.jpeg](img-4.jpeg)

NOTE: ANNUAL TOTAL RETURNS REPRESENTED BY A PORTFOLIO OF 20-YR., 5-YR., AND 30-DAY SECURITIES.
SOURCE: MORNINGSTAR DIRECT SBBI*, DATA AS OF 9/30/2022

23

JOHNSON
INVESTMENT COUNSEL

# HIGHER RATES PRESSURED STOCK MARKET PRICE MULTIPLES

S&P 500 Next Twelve Month Price-to-Earnings Ratio

![img-5.jpeg](img-5.jpeg)

SOURCE: FACTSET, DATA AS OF 12/31/2022

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**JOHNSON**^{}[] INVESTMENT COUNSEL

## MARKET CONCENTRATION STILL A CONCERN DESPITE TOUGH 2022

Historical Weight of Top 5 in S&P 500

![img-6.jpeg](img-6.jpeg)

Relative Valuation

![img-7.jpeg](img-7.jpeg)

When interest rates were at lows, market participants were willing to pay record valuations for companies with the above-average growth prospects. Higher interest rates impacted these names the most as investors were forced to reconcile their high expectations with increasing long-term funding costs.

S&P 500 Top 5 Constituents (As of 12/31/2021)

|  | S&P 500 | Apple | Microsoft | Alphabet | Amazon | Tesla |
| --- | --- | --- | --- | --- | --- | --- |
| Weight (%) |  | 6.9 | 6.3 | 4.2 | 3.6 | 2.1 |
| LTM EV/EBITDA | 17.7 | 26.1 | 23.0 | 19.8 | 41.4 | 175.6 |
| Div. Yield (%) | 1.2 | 0.6 | 0.8 | 0.0 | 0.0 | 0.0 |
| 2022 Return (%) | -18.1 | -26.4 | -28.0 | -39.1* | -49.6 | -65.0 |

Relative Dividend Yield

![img-8.jpeg](img-8.jpeg)

NOTE: HISTORICAL WEIGHT OF TOP 5 SECURITIES IN S&P 500 CHART WAS CALCULATED ON QUARTERLY BASIS. GOOG AND GOOGL WERE COMBINED AND VIEWED AS ONE SECURITY IN THE ANALYSIS, AND GOOGL WAS USED WHEN CALCULATING VALUATION AND DIVIDEND YIELD METRICS. VALUATION AND DIVIDEND YIELD CHARTS WERE CALCULATED ON ANNUAL BASIS. BAC AND C STOCKS WERE EXCLUDED FROM RELATIVE VALUATION CHART WHEN THEY WERE IN TOP 5 GIVEN THAT THEY DID NOT REPORT EBITDA DATA. SOURCE: JOHNSON ASSET MANAGEMENT, FACTSET, DATA AS OF 12/31/2022 UNLESS OTHERWISE NOTED

25

JOHNSON
INVESTMENT COUNSEL

# UNIQUELY CHALLENGING YEAR FOR BOTH STOCKS AND BONDS

Rolling 12-Mo. Stock & Bond Returns since 1990

![img-9.jpeg](img-9.jpeg)

NOTE: BOND RETURNS OF BLOOMBERG US AGGREGATE INDEX, STOCK RETURNS OF S&P 500 INDEX
SOURCE: BLOOMBERG, DATA AS OF 12/31/2022

26

![Johnson Investment Counsel logo]() JOHNSON  
INVESTMENT COUNSEL

## PART II: WHERE ARE WE NOW?

JOHNSON
INVESTMENT COUNSEL

# INFLATION AND INTEREST RATES REMAIN HIGH

![img-10.jpeg](img-10.jpeg)

SOURCE: JOHNSON ASSET MANAGEMENT, BLOOMBERG, DATA AS OF 12/31/2022

28

JOHNSON
INVESTMENT COUNSEL

# INDICATORS THAT INFLATION MAY BE COOLING

![img-11.jpeg](img-11.jpeg)

SOURCE: BLOOMBERG DATA AS OF 12/31/2022

29

JOHNSON
INVESTMENT COUNSEL

# THE PATH TO THE FED'S TARGET WILL TAKE TIME

![img-0.jpeg](img-0.jpeg)

SOURCE: JOHNSON ASSET MANAGEMENT, BLOOMBERG, DATA AS OF 12/31/2022

30

JOHNSON
INVESTMENT COUNSEL

# THE FED AND THE MARKET DISAGREE ON THE RATE PATH FOR 2023

December Fed “Dot Plot vs. Year-End Rate Futures

![img-1.jpeg](img-1.jpeg)

SOURCE: BLOOMBERG DATA AS OF 12/31/2022

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**JOHNSON**  
INVESTMENT COUNSEL

## SIGNS THE ECONOMY IS SLOWING IN RESPONSE TO FED POLICY

### Leading Indicators and Recessions

![img-2.jpeg](img-2.jpeg)

Leading economic indicators have been falling throughout 2022. They are now negative, reaching -4.5% in November. Historically, these levels have been a bad sign for the economy.

#### Timing of YoY LEI at -4.5 or Lower and NBER Recession

| Mar 2020 | Start of Recession |
| --- | --- |
| Dec 2007 | Start of Recession |
| Jan 2001 | 2 Months Prior to Recession Starting |
| Sep 1990 | 3 Months After Recession Started |
| Sep 1981 | 3 Months After Recession Started |
| Oct 1979 | 3 Months Prior to Recession Starting |
| Jan 1974 | 3 Months After Recession Started |

SOURCE: JOHNSON ASSET MANAGEMENT, BLOOMBERG, DATA AS OF 12/31/2022

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**JOHNSON**^{}[] INVESTMENT COUNSEL

## HOWEVER CURRENT RECESSION INDICATORS REMAIN MIXED

| INDICATOR | RECESSION RULE | RECENT SIGNAL | RECESSION Y/N | 2007 | 2001 | 1990 |
| --- | --- | --- | --- | --- | --- | --- |
| MARKET-BASED: |  |  |  |  |  |  |
| YIELD CURVE | 10YR - FF IS NEGATIVE | -0.46% | YES | YES | YES | NO |
| IG CORP SPREADS | ABOVE 150 | 130 | NO | YES | YES | NO |
| HY CORP SPREADS | ABOVE 500 | 469 | NO | YES | YES | NO |
| STOCK MARKET | DECLINE 11% FROM PEAK | -19.8% | YES | NO | YES | NO |
| LABOR MARKET: |  |  |  |  |  |  |
| JOBLESS CLAIMS (4 WK AVG) | ABOVE 360K | 221k | NO | NO | YES | YES |
| UNEMPLOYMENT RATE | +0.5% FROM BOTTOM | +0.2% | NO | YES | NO | NO |
| TEMP EMPLOYMENT | BELOW -1% YOY | 2.4% | NO | YES | YES | NO |
| AVG WEEKLY HOURS | -0.5% YOY | -1.1% | YES | NO | YES | YES |
| BROAD ECONOMY: |  |  |  |  |  |  |
| LEADING INDICATORS | -2% YOY | -4.5% | YES | YES | YES | NO |
| COIN/LAGGING INDEX | 96.3 OR BELOW | 94.0 | YES | NO | NO | NO |
| ECRI | -10% OR BELOW | -8.6% | NO | NO | NO | NO |
| MANUFACTURING: |  |  |  |  |  |  |
| ISM MANUFACTURING | BELOW 47 | 48.4 | NO | NO | YES | YES |
| CAPACITY UTILIZATION | 4 PTS BELOW PEAK | 0.6 | NO | NO | YES | NO |
| NONDEFENSE CAP GOODS EX. AIRCRAFT | 3-MTH AR -10% OR BELOW | 1.3% | NO | NO | YES | NO |
| CONSUMER: |  |  |  |  |  |  |
| HOUSING STARTS | -35% YOY | -16.4% | NO | YES | NO | NO |
| RETAIL SALES EX. GAS | 3-MTH RATE BELOW 0% | 5.8% | NO | YES | YES | NO |
| CONSUMER SENTIMENT | 15 PTS BELOW PEAK | -41.3 | YES | YES | NO | NO |

SOURCE: BLOOMBERG, ECRI, DATA AS OF 12/31/2022

Any expectations presented here should not be taken as any guarantee or other assurance as to future results. Our opinions reflect our best judgment at the time this presentation was created, and we disclaim any obligation to update or alter forward-looking statements as a result of new information, future events or otherwise. The material contained herein is based upon proprietary information and is provided purely for reference and as such is confidential and intended solely for those to whom it was provided by JIC.

33

**JOHNSON**  
INVESTMENT COUNSEL

## RECESSION PROBABILITY CONTINUES TO INCREASE

### Johnson Asset Management Recession Probability Model

![img-3.jpeg](img-3.jpeg)

SOURCE: BLOOMBERG, JOHNSON ASSET MANAGEMENT, DATA AS OF 12/31/2022 (SOME MODEL INPUTS AS OF 11/30/2022).

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JOHNSON
INVESTMENT COUNSEL

# SLOWER ECONOMIC ACTIVITY WOULD PRESSURE CORPORATE PROFITS

S&P 500 Sales - Actual vs. Forecasted by Nominal GDP & CPI

![img-4.jpeg](img-4.jpeg)

NOTE: FORECASTS RESULT FROM REGRESSION ANALYSIS OF NOMINAL GDP, HEADLINE CPI TO S&P 500, QUARTERLY, LOOKING BACK TO 2001
SOURCE: JOHNSON ASSET MANAGEMENT, BLOOMBERG, DATA AS OF 9/30/2022

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JOHNSON
INVESTMENT COUNSEL

# SLOWING ECONOMIC ACTIVITY WEIGHS ON COMPANY EARNINGS

S&P 500 Earnings Per Share & Recessions Since 1968

![img-5.jpeg](img-5.jpeg)

Unsurprisingly, it is normal for S&P 500 earnings to decline during recessions. If a meaningful economic slowdown occurs in 2023, investors should expect to see corporate earnings estimates revised lower.

Earnings Decline During Recession

| 2020 | -17.10% |
| --- | --- |
| 2008 | -50.07% |
| 2001 | -30.49% |
| 1990 | -23.75% |
| 1981 | -23.37% |
| 1980 | -7.89% |
| 1974 | -18.90% |
| 1970 | -16.99% |
| Average | -23.57% |
| Median | -21.14% |

NOTE: EARNINGS DECLINE DEFINED AS MAX TO MIN S&P 500 LTM EPS +/- 6-MONTHS OF RECESSIONS.
SOURCE: JOHNSON ASSET MANAGEMENT, BLOOMBERG, DATA AS OF 12/31/2022

36

JOHNSON
INVESTMENT COUNSEL

# COMPANIES & ANALYSTS ARE NOT YET FORECASTING A SLOWDOWN

# S&P 500 Earnings Per Share

![img-6.jpeg](img-6.jpeg)

NOTE: RECESSION DRAWDOWN CALCULATED AS MAX TO MIN S&P 500 LTM EPS +/- 6 MONTHS OF RECESSIONS; GROWTH FOLLOWING RECESSION USES EPS GROWTH 12-MONTHS FOLLOWING RECESSION LOW

SOURCE: JOHNSON ASSET MANAGEMENT, FACTSET, DATA AS OF 12/31/2022

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JOHNSON
INVESTMENT COUNSEL

# MARKETS NORMALLY BOTTOM BEFORE THE ECONOMY

# ISM Purchasing Managers Index (PMI)

![img-7.jpeg](img-7.jpeg)

SOURCE: JOHNSON ASSET MANAGEMENT, BLOOMBERG, DATA AS OF 11/30/2022

2) However, the market looks forward and stocks typically rebound ahead of the economy.

![img-8.jpeg](img-8.jpeg)

3) The 12-months after a PMI bottom are historically very good times to be fully invested.

| PMI Bottom | S&P 500 Return 12-Mo. Forward |
| --- | --- |
| 11/1970 | 7.79% |
| 1/1975 | 31.02% |
| 5/1980 | 19.19% |
| 5/1982 | 45.15% |
| 1/1991 | 18.86% |
| 10/2001 | -16.42% |
| 12/2008 | 23.45% |
| 4/2020 | 43.56% |
| Average | 21.58% |

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JOHNSON
INVESTMENT COUNSEL

# VALUATION CORRECTIONS BODE WELL FOR LONG-TERM INVESTORS

1-Year Annualized S&P 500 Returns vs.
Starting P/E Levels

![img-9.jpeg](img-9.jpeg)

10-Year Annualized S&P 500 Returns vs.
Starting P/E Levels

![img-10.jpeg](img-10.jpeg)

NOTE: 1-, 10-YEAR ANNUALIZED RETURNS CALCULATED USING DAILY INDEX VALUES AND STARTING P/E LEVELS
SOURCE: JOHNSON ASSET MANAGEMENT, BLOOMBERG DATA FROM 9/30/1990 - 9/30/2022

39

JOHNSON
INVESTMENT COUNSEL

# BOND RETURNS FOLLOW STARTING YIELD LEVELS

Starting Yield & Total Returns - Bloomberg US Aggregate Index

![img-0.jpeg](img-0.jpeg)

SOURCE: BLOOMBERG, DATA AS OF 12/31/2022

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JOHNSON
INVESTMENT COUNSEL

# COMPARISON OF CALENDAR YEAR BOND RETURNS

Bloomberg US Aggregate Index - Calendar Year Returns Since 1989

![img-1.jpeg](img-1.jpeg)

SOURCE: BLOOMBERG, DATA AS OF 12/31/2022

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JOHNSON
INVESTMENT COUNSEL

# WITH HIGHER YIELDS BOND RETURN ASYMMETRY INCREASES

Bond Benchmark Scenarios - Interest Rates & Total Returns

As rates rise, bond portfolios become more resilient to further rate increases because additional yield helps offset the negative price return. If rates continue to rise, the total return impact at current yield levels will be much less negative than what was experience in 2022. On the other hand, if rates fall, bonds will provide meaningful total returns.

![img-2.jpeg](img-2.jpeg)

NOTE: ASSUMES PARALLEL SHIFT IN YIELD CURVE HOLDING ALL ELSE CONSTANT
SOURCE: BLOOMBERG, BONDEDGE DATA AS OF 12/31/2022

42

JOHNSON
INVESTMENT COUNSEL

# INCOME IS THE PRIMARY DRIVER OF LONG-TERM BOND RETURNS

![img-3.jpeg](img-3.jpeg)

NOTE: HYPOTHETICAL PORTFOLIO OF LADDERED US TREASURY SECURITIES OF 1-YR, THROUGH 10-YR. BONDS MODELED WITH COUPON REINVESTMENT AT ON THE RUN YIELD
SOURCE: JOHNSON ASSET MANAGEMENT, BLOOMBERG, DATA AS OF 12/31/2022

43

JOHNSON
INVESTMENT COUNSEL

# STRATEGIC ASSET ALLOCATION MARKET BAROMETER

|  | Unattractive | Neutral | Attractive |
| --- | --- | --- | --- |
| EQUITIES |  |  |  |
| U.S. Large Cap |  |  |  |
| U.S. Mid Cap |  |  |  |
| U.S. Small/Microcap |  |  |  |
| International |  |  |  |
| FIXED INCOME |  |  |  |
| Government |  |  |  |
| Investment Grade |  |  |  |
| High Yield |  |  |  |
| REAL ASSETS |  |  |  |
| Infrastructure |  |  |  |
| REITs |  |  |  |
| Gold |  |  |  |
| CASH |  |  |  |

Note: We cannot promise future results. Our opinions reflect our best judgement at the time this presentation was created, and we disclaim any obligation to update or alter forward looking statements as a result of new information, future events or otherwise.

44

JOHNSON
INVESTMENT COUNSEL

# EXECUTIVE SUMMARY: NEAR-TERM UNCERTAINTY, BRIGHTEST LONG-TERM OUTLOOK IN YEARS

- Inflation and the Fed’s response to it were the key drivers of 2022 returns across asset classes.
- There are signs inflation is moderating. Unfortunately, there are also signs the economy is slowing.
- Slowing economic activity could make it hard for companies to meet current earnings estimates. Earnings disappointments can lead to market volatility.
- As is often the case, the market is pricing in some level of disappointment in advance of actual earnings revisions. Similarly, markets tend to recover before the economy and normally provide outside returns early in recoveries.
- Valuations for stocks and bonds are more compelling than they have been in years. Lower earnings multiples and higher interest rates are very positive for the long-term outlook.
- As always, risk management is critical to long-term success. While caution is prudent to protect near-term spending needs, investors with long-term time horizons would do well to view short-term volatility opportunistically.

45

**JOHNSON**^{}[] INVESTMENT COUNSEL

## STRATEGIC ASSET ALLOCATION SCALE

| ASSET CLASS | Conservative Higher Returns for Bond Risk |  | Moderate-Conservative |  | Moderate Higher Returns for 60/40 Balanced Risk |  | Moderate- Aggressive |  | Aggressive Stock Returns at Lower Risk |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | GOAL % | STRATEGIC RANGE % | GOAL % | STRATEGIC RANGE % | GOAL % | STRATEGIC RANGE % | GOAL % | STRATEGIC RANGE % | GOAL % | STRATEGIC RANGE % |
| Equities | 19.1% | 0-30% | 38.2% | 20-50% | 57.3% | 40-70% | 71.6% | 55-85% | 86.0% | 70-100% |
| U.S. Equities - Large Cap | 13.4% |  | 26.7% |  | 40.1% |  | 50.09% |  | 60.10% |  |
| U.S. Equities - Mid Cap | 1.1% |  | 2.2% |  | 3.4% |  | 4.20% |  | 5.04% |  |
| U.S. Equities - Small Cap | 1.3% |  | 2.6% |  | 3.8% |  | 4.80% |  | 5.76% |  |
| International Equities | 3.3% |  | 6.7% |  | 10.0% |  | 12.54% |  | 15.05% |  |
| Fixed Income | 80.0% | 40-90% | 60.0% | 30-70% | 40.0% | 20-50% | 25.00% | 10-30% | 10.00% | 0-10% |
| Investment Grade | 80.0% |  | 60.0% |  | 40.0% |  | 25.00% |  | 10.00% |  |
| TIPs | 0.0% |  | 0.0% |  | 0.0% |  | 0.00% |  | 0.00% |  |
| Alternatives | 0.0% | 0-30% | 0.0% | 0-25% | 0.0% | 0-20% | 0.0% | 0-20% | 0.0% | 0-20% |
| High Yield Bonds | 0.0% |  | 0.0% |  | 0.0% |  | 0.0% |  | 0.0% |  |
| Absolute Return | 0.0% |  | 0.0% |  | 0.0% |  | 0.0% |  | 0.0% |  |
| Real Assets | 0.9% | 0-30% | 1.8% | 0-25% | 2.7% | 0-20% | 3.4% | 0-20% | 4.1% | 0-20% |
| Commodities | 0.0% |  | 0.0% |  | 0.0% |  | 0.0% |  | 0.0% |  |
| MLPs | 0.0% |  | 0.0% |  | 0.0% |  | 0.0% |  | 0.0% |  |
| Infrastructure | 0.6% |  | 1.2% |  | 1.8% |  | 2.3% |  | 2.7% |  |
| Gold/Precious Metals | 0.0% |  | 0.0% |  | 0.0% |  | 0.00% |  | 0.0% |  |
| Real Estate | 0.3% |  | 0.6% |  | 0.9% |  | 1.13% |  | 1.35% |  |
| Cash | 0.0% | 0-10% | 0.0% | 0-10% | 0.0% | 0-10% | 0.00% | 0-10% | 0.00% | 0-10% |

*Goal percentages may not total 100% due to rounding.

46

![Johnson Investment Counsel logo]() JOHNSON  
INVESTMENT COUNSEL

# PART III: APPENDIX

JOHNSON
INVESTMENT COUNSEL

# A TIMELINE FOR THE U.S. CONSUMER PRICE INDEX

Energy and food spikes after Russia invades Ukraine

2.

|  | 2020 |  | 2021 |  |  |  |  |  |  |  |  |  |  |  | 2022 |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | Weight | Dec | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov |  |
| Headline CPI (y/y) | 100.0% | 1.3% | 1.4% | 1.7% | 2.7% | 4.2% | 4.9% | 5.3% | 5.3% | 5.2% | 5.4% | 6.2% | 6.8% | 7.1% | 7.5% | 7.9% | 8.6% | 8.2% | 8.7% | 9.0% | 8.5% | 8.2% | 8.2% | 7.8% | 7.1% |  |
| Core CPI (y/y) | 78.2% | 1.6% | 1.4% | 1.3% | 1.7% | 3.0% | 3.8% | 4.4% | 4.2% | 4.0% | 4.0% | 4.6% | 5.0% | 5.5% | 6.0% | 6.4% | 6.4% | 6.1% | 6.0% | 5.9% | 5.9% | 6.3% | 6.7% | 6.3% | 6.0% |  |
| Headline CPI (m/m) | 100.0% | 0.3% | 0.2% | 0.4% | 0.6% | 0.6% | 0.7% | 0.9% | 0.5% | 0.3% | 0.4% | 0.9% | 0.7% | 0.6% | 0.6% | 0.8% | 1.2% | 0.3% | 1.0% | 1.3% | 0.0% | 0.1% | 0.4% | 0.4% | 0.1% |  |
| Core CPI (m/m) | 78.2% | 0.1% | 0.0% | 0.2% | 0.3% | 0.9% | 0.7% | 0.8% | 0.3% | 0.2% | 0.3% | 0.6% | 0.5% | 0.6% | 0.6% | 0.5% | 0.3% | 0.6% | 0.6% | 0.7% | 0.3% | 0.6% | 0.6% | 0.3% | 0.2% |  |
| Energy | 8.1% | 3.7% | 2.8% | 4.6% | 5.6% | -1.2% | 0.7% | 2.1% | 1.6% | 1.9% | 1.2% | 3.7% | 2.4% | 0.9% | 0.9% | 1.5% | 11.0% | -2.7% | 3.9% | 7.5% | 4.6% | -5.0% | -2.1% | 1.8% | -1.6% |  |
| Gasoline | 4.1% | 7.0% | 5.8% | 8.2% | 10.3% | -3.3% | 0.6% | 3.3% | 2.5% | 2.5% | 1.1% | 4.6% | 4.5% | 1.3% | -0.8% | 6.6% | 18.3% | -6.1% | 4.1% | 11.2% | -2.7% | -10.6% | -4.9% | 4.0% | -2.0% |  |
| Electricity | 2.6% | 0.6% | 0.0% | 0.5% | 0.2% | 0.7% | 0.5% | 0.2% | 0.2% | 1.0% | 0.6% | 1.4% | 0.2% | 0.5% | 4.2% | -1.1% | 2.2% | 0.7% | 1.3% | 1.7% | 1.5% | 1.5% | 0.4% | 0.1% | -0.2% |  |
| Utility Gas | 1.0% | 0.5% | -0.4% | 1.7% | 2.4% | 2.2% | 1.8% | 1.8% | 2.2% | 1.6% | 2.9% | 5.9% | 0.3% | -0.3% | -0.5% | 1.5% | 0.6% | 3.1% | 8.0% | 8.2% | -3.6% | 3.5% | 2.9% | -4.6% | -3.5% |  |
| Food | 13.7% | 0.3% | 0.2% | 0.1% | 0.2% | 0.4% | 0.5% | 0.7% | 0.7% | 0.4% | 0.9% | 0.9% | 0.8% | 0.5% | 0.9% | 1.0% | 1.0% | 0.9% | 1.2% | 1.0% | 1.1% | 0.8% | 0.8% | 0.6% | 0.5% |  |
| Food at Home | 8.5% | 0.3% | 0.1% | 0.2% | 0.2% | 0.4% | 0.4% | 0.7% | 0.6% | 0.4% | 1.2% | 0.9% | 0.9% | 0.4% | 1.0% | 1.4% | 1.5% | 1.0% | 1.4% | 1.0% | 1.3% | 0.7% | 0.7% | 0.4% | 0.5% |  |
| Food away from Home | 5.2% | 0.4% | 0.3% | 0.1% | 0.1% | 0.3% | 0.6% | 0.7% | 0.2% | 0.4% | 0.5% | 0.8% | 0.6% | 0.6% | 0.7% | 0.4% | 0.3% | 0.6% | 0.7% | 0.9% | 0.7% | 0.9% | 0.9% | 0.9% | 0.5% |  |
| Core Goods | 21.0% | 0.0% | 0.1% | -0.1% | 0.2% | 2.0% | 1.8% | 2.1% | 0.4% | 0.4% | 0.3% | 1.1% | 0.9% | 1.2% | 1.0% | 0.4% | -0.4% | 0.2% | 0.7% | 0.8% | 0.2% | 0.5% | 0.0% | -0.4% | -0.5% |  |
| Apparel | 2.5% | 0.5% | 1.4% | -0.5% | 0.4% | 0.6% | 1.1% | 0.5% | 0.1% | 0.3% | -0.7% | 0.6% | 0.7% | 1.1% | 1.1% | 0.7% | 0.6% | -0.8% | 0.7% | 0.8% | -0.1% | 0.2% | -0.3% | -0.7% | 0.2% |  |
| New Vehicles | 4.1% | 0.6% | -0.4% | 0.1% | 0.0% | 0.5% | 1.5% | 1.7% | 1.5% | 1.2% | 1.3% | 1.3% | 1.2% | 1.2% | 0.0% | 0.3% | 0.2% | 1.1% | 1.0% | 0.7% | 0.6% | 0.8% | 0.7% | 0.4% | 0.0% |  |
| Used Cars | 3.7% | -1.1% | -0.9% | -0.7% | 0.3% | 9.8% | 7.7% | 10.1% | 0.0% | -1.2% | -0.5% | 2.5% | 2.4% | 3.3% | 1.5% | -0.2% | -3.8% | -0.4% | 1.8% | 1.6% | -0.4% | -0.1% | -1.1% | -2.4% | -2.9% |  |
| Medical Care Commd. | 1.5% | -0.2% | -0.1% | -0.7% | 0.1% | 0.6% | 0.0% | -0.4% | 0.2% | -0.2% | 0.3% | 0.6% | 0.1% | 0.0% | 0.9% | 0.3% | 0.2% | 0.1% | 0.3% | 0.4% | 0.6% | 0.2% | -0.1% | 0.0% | 0.2% |  |
| Core Services | 57.2% | 0.1% | 0.1% | 0.2% | 0.3% | 0.5% | 0.4% | 0.4% | 0.3% | 0.1% | 0.2% | 0.4% | 0.4% | 0.3% | 0.4% | 0.5% | 0.6% | 0.7% | 0.6% | 0.7% | 0.4% | 0.6% | 0.8% | 0.5% | 0.1% |  |
| Shelter | 32.7% | 0.1% | 0.1% | 0.2% | 0.3% | 0.4% | 0.5% | 0.4% | 0.4% | 0.2% | 0.4% | 0.5% | 0.5% | 0.4% | 0.3% | 0.5% | 0.5% | 0.5% | 0.6% | 0.6% | 0.5% | 0.7% | 0.7% | 0.8% | 0.0% |  |
| Rent of Primary Res. | 7.4% | 0.1% | 0.1% | 0.2% | 0.2% | 0.2% | 0.3% | 0.2% | 0.2% | 0.3% | 0.4% | 0.4% | 0.4% | 0.4% | 0.5% | 0.6% | 0.4% | 0.6% | 0.6% | 0.8% | 0.7% | 0.7% | 0.8% | 0.7% | 0.1% |  |
| OER | 24.0% | 0.2% | 0.1% | 0.2% | 0.2% | 0.2% | 0.3% | 0.3% | 0.3% | 0.3% | 0.4% | 0.4% | 0.4% | 0.4% | 0.4% | 0.4% | 0.4% | 0.5% | 0.6% | 0.7% | 0.6% | 0.7% | 0.8% | 0.6% | 0.7% |  |
| Transportation Services | 6.0% | -0.1% | 0.5% | 0.4% | 0.1% | 0.0% | -0.1% | 0.0% | 0.2% | 0.2% | 0.2% | 0.4% | 0.3% | 0.3% | 0.6% | 0.1% | 0.6% | 0.5% | 0.4% | 0.7% | 0.4% | 0.8% | 1.0% | -0.6% | -0.7% |  |

1.

Initial supply chain-induced goods inflation

3.

Price increases impacting services sectors

SOURCE: JOHNSON ASSET MANAGEMENT, BLS, DATA AS OF 11/30/2022

48

JOHNSON
INVESTMENT COUNSEL

# DIFFICULT TO PREDICT POLICY TURNING POINTS

Fed "Dots" vs. Actual Fed Funds

![img-4.jpeg](img-4.jpeg)

SOURCE: JOHNSON ASSET MANAGEMENT, BLOOMBERG, DATA AS OF 12/31/2022

49

JOHNSON
INVESTMENT COUNSEL

# HOUSING ACTIVITY SLOWING WITH HIGHER INTEREST RATES

New Home Sales (000's Annualized)

![img-0.jpeg](img-0.jpeg)

Median Mortgage Payment

![img-1.jpeg](img-1.jpeg)

SOURCE: JOHNSON ASSET MANAGEMENT, BLOOMBERG, DATA AS OF 12/31/2022

50

JOHNSON
INVESTMENT COUNSEL

# GROWTH VALUATIONS REMAIN EXTENDED RELATIVE TO VALUE

![img-2.jpeg](img-2.jpeg)

SOURCE: BLOOMBERG, DATA AS OF 12/31/2022

51

JOHNSON
INVESTMENT COUNSEL

# SMALLER COMPANIES REMAIN RELATIVELY ATTRACTIVE

![img-3.jpeg](img-3.jpeg)

SOURCE: BLOOMBERG, DATA AS FROM 1995 TO 12/31/2022

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JOHNSON
INVESTMENT COUNSEL

# INTERNATIONAL DIVERSIFICATION APPROPRIATE

![img-4.jpeg](img-4.jpeg)

![img-5.jpeg](img-5.jpeg)

NOTE: TRADE WEIGHTED DOLLAR IS US FED TRADE WEIGHTED REAL AFE INDEX
SOURCE: BLOOMBERG, FACTSET, JOHNSON ASSET MANAGEMENT, DATA AS OF 12/31/2022

53

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INVESTMENT COUNSEL

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- DAYTON
- METRO DETROIT

One of our most important responsibilities to client and prospective clients is to communicate in an open and direct manner. Some of our comments in this presentation are based on current management expectations and are considered "forward-looking statements". Actual future results, however may prove to be different from our expectations. We cannot promise future results. Any performance expectations presented here should not be taken as any guarantee or other assurance as to future results. Our opinions are a reflection of our best judgment at the time this presentation was created, and we disclaim any obligation to update or alter forward-looking statements as a result of new information, future events or otherwise. The material contained herein is based upon proprietary information and is provided purely for reference and as such is confidential and intended solely for those to whom it was provided by JIC. Certain information provided herein is based on third-party sources. Although believed to be accurate, the information provided from third-party sources has not been independently verified. JIC assumes no liability for errors and omissions in the information contained herein.

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