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Hinds Howard

Principal, Associate Portfolio Manager, Infrastructure

Status Update: Midstream Green in September

Given the end of the month and quarter fell on a Monday, I wanted to get a quick post out with updated month and quarter end numbers.  I hope you’ll understand if the upcoming weekly post is a bit shorter as a result. 

After a rough end to the summer with back to back negative months, midstream bounced back in September with a 2.0% gain.  Canadian midstream was strong, while MLPs lagged, a trend that’s been persistent for about a year now.

For the full quarter that’s now in the books, the midstream index finished down 1.9%, including distributions, offsetting a slightly positive 2Q.  The SPDR S&P Oil & Gas E&P ETF (ticker XOP) dropped 17.7% in the quarter, so being down less than 2% with a group of stocks involved in the fossil fuel business should feel pretty good.  But by comparison, the UTY was up 8.4% without including dividends and the S&P 500 was positive. 

Looking ahead to October, the AMNA index has been down 4%+ in each of the last 3 years in October, including last year’s 6.8% pummeling that kicked off a horrible 4Q for the sector.

MLP Index: Less Buoyant, But Positive September

The MLP Index finished slightly positive for September (+0.7%), a small bounce back from sharp declines in August.  MLPs finished 3Q down 5.0%, including distributions, and are down 8.1% year over year.  MLPs are still up double digits YTD with 11.1% return. 

In recent years, 4Q has not been kind to MLPs, due to a combination of tax loss selling, weak commodity price action and risk-off mood in the broad market.  The AMZ has posted negative returns in 4 of the last 5 fourth quarters, with average returns of -6.3%.  2016 was the last positive 4Q for the AMZ, and that was just a 2% gain. 

MLPs have been negative in each of the last 3 Octobers, but even still October returns historically have been the best among the three months of the fourth quarter, with average returns over 23 years of 1.4%.  Last year’s -8.0% returns was the worst ever for MLPs.