In the month of August MLPs struggled (DWA MLP Index -4.1%, Alerian MLP Index -5.5%) as equities sold off and oil was down almost 6% while gasoline was down 15.2%.
Two key energy market drivers in August were China trade talks and crude supply. The US and China struggled to make progress in August. No deal is being interpreted by the market as a potential demand risk. In addition, August saw a couple surprise crude builds. These unexpected builds proved to be a catalyst for sharp selloffs in WTI.
With commodities and the S&P 500 selling off in August, MLPs were not immune. However, the DWA MLP Index continues to outperform the Alerian benchmark; August outperformance +1.4% and +10.5% YTD. This is the tenth month out of twelve & twentieth month out of the last twenty-five that DWA outperformed.
We believe September’s macro environment will again be led by China trade talks. Announced September deputy level meetings and October senior meetings led to a macro rally on 9/4 and 9/5. Crude followers will be keeping close tabs on oil supplies to see if the surprise builds in August were a one-off or a new trend.
Macro-Backdrop: Energy, Equity, & Commodity Performance
August DWA MLP Index Constituents Performance
The DWA MLP Index vs. Alerian MLP Index Historical Total Return Performance
MLP Index Constituents by Subindustry
The current holdings and weights for the DWA MLP Index as of September 3rd, 2019
On a monthly basis, the DWA MLP Index rebalances to equal-weight after selecting the top 15 MLPs exhibiting the largest positive relative strength characteristics according to the proprietary Dorsey Wright Relative Strength Ranking Methodology.
The current holdings and weights for the Alerian MLP Index as of September 3rd, 2019
The Alerian MLP Index is a capped, float-adjusted, capitalization-weighted index, whose constituents earn the majority of their cash flow from midstream activities involving energy commodities.
What is the DWA MLP Select™ Index?
The DWA MLP Select™ Index includes 15 MLPs based on the proprietary Dorsey Wright Relative Strength Ranking Methodology. Relative Strength attempts to minimize exposure to underperforming positions, while maximizing exposure to securities that have demonstrated the potential to outperform the other securities in the investment universe. On a monthly basis, this index rebalances the equally-weighted basket by selecting the top 15 MLPs exhibiting the largest positive relative strength characteristics.
Source: Bloomberg L.P. DWA MLP Select™ Index was launched on 5/1/2016. DWA MLP Select™ Index data prior to that date is hypothetical and reflects the application of the index methodology in hindsight. The hypothetical data cannot completely account for the impact of financial risk in actual trading. Past historical or hypothetical data is not a guarantee of future index performance.
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