Status Update: Midstream Trending Higher

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Includes: AMJ, AMJL, AMLP, AMU, AMUB, AMZA, ATMP, CBA, CEM, CEN, CTR, DSE, EMLP, EMO, ENFR, FEI, FEN, FMO, FPL, GER, GMZ, ILPRX, IMLP, JMF, JMLP, KMF, KYE, KYN, MIE, MLPA, MLPB, MLPI, MLPN, MLPO, MLPQ, MLPS, MLPX, MLPZ, NML, NTG, SMM, SRF, SRV, TTP, TYG
by: Hinds Howard

The MLP Index produced 6.6% total return in July, the best July since 2010. Looking ahead, August has been negative in each of the last 3 years and 7 of the last 9. For the MLP rally to continue, the stocks would need to counter these seasonal headwinds that typically restrain MLP buying late in the summer.

July was the 4th positive month of the year for the index, and the 4th month with 5%+ gains this year. The record for most 5%+ positive months in a single year is 6, achieved in 2009. To break the record of +5% months in a single year, we'd have to have 5% gains in 3 of the remaining 5 months. That's probably a stretch, unless those big positive months were interspersed with a month or two of downdrafts.

It is notable that in every prior year in which there were this many 5% positive months, the MLP Index produced at least 35% total return for the full year. The major difference is that in 2018, we've had two 5%+ negative months, whereas in each of the four other years listed (2009, 2000, 2001, 2010), only 2010 had even one month of negative 5% return.

The AMNA Index has replaced the AMEI in this monthly snapshot as the proxy for the broad midstream sector, for reasons to be discussed in an upcoming post. In short, it captures the midstream sector without a subjective cap related to structure, unlike the AMEI, which restricts MLPs to just 25% to mimic RIC fund structures. AMNA has 43% of its weight in MLPs, more in-line with the universe of midstream opportunities.

The AMNA produced 4.1% return in July, running its streak of consecutive positive months to 4.