Market Commentary: Please Tone Down the Rhetoric, Mr. President
- Yves Siegel
- Apr 28
- 9 min read
“Our bottom line is staying the course with midstream companies that pay attractive and growing dividends, have solid balance sheets, have demonstrated financial discipline, and have proven resilient businesses through various economic cycles. That said, expect continued market volatility given uncertainty around the Trump tariffs and the geopolitical consequences.” - SAM Partners' April Quick Hit
Textbook finance suggests that investors should be compensated for taking on additional risk and rewarded with higher returns. Paradoxically, this often causes short-term market declines as investors adjust pricing to account for increased uncertainty. When clarity returns, prices tend to rebound.
A useful gauge of risk is the CBOE Volatility Index (VIX), or “fear index,” which is a real-time measure of the 30-day expected volatility in the S&P 500. It should not be surprising that the VIX is currently elevated given the uncertainties surrounding U.S. trade policies, the President’s acrimony toward the Federal Reserve Chairman, and the heightened risk for higher inflation and global recession (stagflation).
It’s unsurprising that the market may have bottomed on April 8th, the day before “reciprocal tariffs” were to take effect, and the VIX peaked at 52.33—well above its historical average of 20. Since President Trump took office on January 20, the VIX has averaged 22.3, during which time the S&P 500 dropped over 10%.
Our humble advice to the President is to continue to tone down the rhetoric. The market surged the day after the President said, regarding China, that, “…we’re going to be very nice and they’re going to be very nice, and we’ll see what happens.” “It (tariffs) will come down substantially, but it won’t be zero.” Further, regarding Chairman Powell, “I have no intention of firing him.” “Never did.”
Performance of VIX vs. S&P 500 Since Inauguration Day
Source: Bloomberg
SAM Partners Portfolio’s Favor Natural Gas Stocks
Our portfolio investment in natural gas-focused companies is predicated on the projected 20-30 billion cubic feet per day (Bcf/d) increase in natural gas demand by the end of this decade. To level set, the U.S. currently consumes and exports approximately 105 Bcf/d. This growth will be driven by increasing power demand, LNG and pipeline exports, and industrial usage. Companies that provide the infrastructure to process and transport natural gas and LPGs are well positioned to benefit from this long-term term secular trend. The largest positions in our portfolios are Targa Resources Corp. (NYSE-TRGP), Cheniere, Inc. (NYSE-LNG) and Energy Transfer (NYSE-ET). Other natural gas focused holdings include DT Midstream (NYSE-DTM), Kinder Morgann, Inc (NYSE-KMI), and Williams Cos. (NYSE-WMB).
PERSPECTIVES
WELLS FARGO ENERGY EQUITY RESEARCH TEAM. The team recently raised their Artificial Intelligence (AI) power demand estimate to 75 gigawatts (GW) by 2030, up from its prior estimate of 70 GW in its “AI Power Surge—From Dollars to Watts—Using Capex to Forecast Power Growth” report published on 4/22/25. Additionally, the team raised its forecast for natural gas consumed by AI data centers to 9 Bcf/d by 2030 from 7 Bcf/d, if gas powers 70% of AI data center build-out (up from its previous 50%).
Natural Gas Used for AI Data Centers
Source: EIA & Wells Fargo Securities, LLC estimates. US region only
MIDSTREAM. Natural gas-focused midstream companies like Kinder Morgan, Inc. (KMI) also communicated a positive outlook on data center driven natural gas demand. This quarter, KMI increased its capex budget by $900MM to primarily reflect power projects. Total capex approximates $8.8B, of which 91% is tied to natural gas investments. Other takeaways from KMI’s earnings release:
The U.S. set a first quarter demand record as demand grew by 6.8 bcf/d versus the first quarter of 2024. Residential/commercial natural demand and LNG feedgas demand were up 10% and 15%, respectively, according to KMI.
KMI projects potential demand for U.S. natural gas to grow between 20-28 Bcf/d by the end of the decade. According to Wood Mackenzie, demand for LNG feedgas is projected to more than double over the same period.
CLEAN ENERGY. NextEra Energy, Inc. (NYSE-NEE) estimates that U.S. data centers will require more than 450 gigawatts (GW) of cumulative demand for new generation between now and 2030. The company expects that 75 GW will be provided by natural gas-fired power plants, which appears consistent with the Wells Fargo forecast.
Estimated U.S. Cumulative Nameplate Capacity Additions GW
Source: BloombergNEF New Energy Outlook 2024 - ETS (Energy Transition Scenario) case
E&P. EQT Corp (NYSE-EQT) remarked on its Q1 earnings call that it remains constructive on natural gas demand and prices. Q1 pricing benefitted from colder weather as well as secular growth in demand by industrials, power plants and LNG exports. The company states that data center demand is “becoming the cornerstone to the natural gas bull case.” EQT forecasts that the surge in data centers and artificial intelligence, along with additional coal retirements, will drive a further ~10 Bcf/d of incremental natural gas demand by 2030 in its base case scenario.
They believe natural gas production needs to grow to near 108 Bcf/d per day by year-end 2025 and 114 Bcf/day by year end 2026, with growth primarily met by higher volumes from the Permian and Haynesville. This implies a significant ramp from current production levels of 104-105 Bcf/d or a higher gas price level to dampen demand.
Energy Information Administration (EIA). U.S. natural gas demand is expected to grow 4% to 116 Bcf/d in 2025, according to the EIA Short Term Energy Outlook published in April 2025. The forecasted growth is primarily driven by higher U.S. LNG exports with two new export facilities ramping up. The EIA expects U.S. LNG exports to be slightly above 15 Bcf/d in 2025, or about 1 Bcf/d (7%) more than the agency had forecast last month. LNG exports are expected to continue to drive natural gas demand growth in 2026, projected to grow by 1.2 Bcf/d in 2026 to reach an average of 16.4 Bcf/d.
MACRO OIL. Fears of a global recession and a higher-than-expected ramp in OPEC+ production have spooked the market. WTI crude oil prices have fallen nearly $10 per barrel thus far in April and hover around $62 per barrel. Oil prices a year ago were above $82 per barrel. In its latest quarterly survey, the Dallas Federal Reserve noted that Permian producers need WTI prices of $61 to $62 per barrel to profitably drill a new well. This is noteworthy because at prices below $60 per barrel oil production and associated natural gas production growth could slow.
Earlier this month, the International Energy Agency (IEA) OPEC+, and EIA cut their global oil demand forecast to reflect slower economic growth assumptions stemming from higher U.S. trade tariffs. Specifically, the IEA now forecasts just 730,000 bpd demand growth in 2025, reduced by 300,000bpd; and 690,000 bpd growth in 2026. This contrasts meaningfully with a much more optimistic OPEC+ projection of 1.3 million bpd growth in demand for 2025 (revised down by 150,000 bpd) and 2026. The growth in demand is led by China, India, and Other Asia.
The EIA revised down its 2025 and 2026 demand growth forecasts by 0.4 million b/d and 0.1 million b/d to 0.9 million b/d and 1.0 million bpd, respectively.
INTERESTING TO NOTE: The most bearish demand forecast is from the European based IEA and the most bullish forecast is from OPEC+. I’m sure that neither group is biased or politically motivated!
DON’T FORGET CLEAN ENERGY
Even with our focus on oil and natural gas—and the Trump administration’s rollback of clean energy initiatives—renewables are still expected to be the fastest-growing power source in the U.S. and globally. We strongly believe U.S. companies, including those in the energy sector, will continue pursuing emission reduction goals despite shifting political priorities. Policies and Presidential Executive Orders can be reversed, and the Republicans may lose their slim majorities in the House and Senate, especially with midterm elections less than two years away and a presidential election in under four. Regardless of the political winds, reducing emissions is the right thing to do.
According to NextEra Energy, renewables and battery storage are the lowest cost of power generation and can be constructed and connected to the grid within 12 to 18 months. Chairman and CEO John Ketchum said on the company’s Q1 call, “We should be thinking about renewables and battery storage as a critical bridge to when other technology is ready at scale, like new gas-fired plants.” While natural gas-fired plants will be built, growth is expected to be constrained by limited supply of gas turbines and skilled labor.
RENEWABLES AND NATURAL GAS PLAY LARGER ROLES IN ELECTRICITY GENERATION
Globally, fossil fuels accounted for almost 60% of electricity generation in 2024, according to the recently published IEA Global Energy Review report. Specifically, natural gas had the highest market share in the U.S. with over 40%. The IEA noted that the 4% growth in global electricity generation was heavily weighted towards clean energy (nuclear and renewables) last year (i.e., over 80% globally, up from two-thirds of growth in 2023). Solar PV was the highest contributing source with a 480 TWh annual increase in electricity generation. In total, renewables accounted for one-third and 23% of global and U.S. electricity generation, respectively, in 2024.
Source: IEA (2025), Global Energy Review 2025, IEA, Paris https://www.iea.org/reports/global-energy-review-2025, License: CC BY 4.0
UPCOMING SAM FIRESIDE CHATS—PLEASE JOIN US!
Thursday, May 1st at 11:00 AM EST. David Slater (CEO) and Jeff Jewell (CFO) of DT Midstream, Inc. (DTM). LINK to register for this webinar.
Wednesday, May 7th at 11:00 AM EST. Pierce H. Norton II (CEO) and Walter H. Hulse (CFO) of ONEOK, Inc. (OKE)
Tuesday, June 3rd at 11:00 AM ESTJohn Porter (CFO) of the Williams Companies, Inc. (WMB)
MARCH REVIEW: ENERGY IS THE TOP PERFORMER
The rundown:
In March, SAM’s Infrastructure Income Portfolio produced a return (net of fees) of 0.9% compared to -5.6% for the S&P 500 and 1.6% for its customized benchmark. Year-to-date, SAM’s Infrastructure Income Portfolio produced a return (net of fees) of 6.4% compared to -4.3% for the S&P 500 and 5.3% for its customized benchmark.
In March, SAM’s Energy Transition Portfolio generated a return (net of fees) of -3.9% versus 1.8% for its customized benchmark. Year-to-date, SAM’s Energy Transition Portfolio generated a return (net of fees) of -5.0% versus 3.3% for its customized benchmark.
SAM’s portfolios are more heavily weighted in Midstream, which has outperformed relative to the clean energy sector but underperformed utilities year-to-date.
Midstream outperformed the overall market and was up in March with a total return of 1.8%, as measured by the AMNAX.
In March, utilities and the clean energy sector outperformed the overall market, generating a total return of 0.7% and 2.2%, as measured by the Philadelphia Stock Exchange Utility Index (XUTY) and the S&P Global Clean Energy Index (SPGTCLTR), respectively.
With the exception of Energy and Utilities, sector performance in the S&P 500 was down with energy as the best performer and technology as the worst. Energy delivered a 3.9% monthly total return. March month-end WTI crude oil and Henry Hub natural gas prices were $71.87 Bbl and $4.11 per MMBtu, up ~3% and ~5%, respectively from last month.
RESULTS: SINCE INCEPTION & ONE YEAR
SAM’s Infrastructure Income Portfolio produced a return (net of fees) of 145.0% and 37.0% for the periods since 11/10/20 inception and 1-year, respectively. This compares to a total return of 130.4% and 25.0%, respectively, for its customized benchmark and 69.2% and 8.3%, respectively, for the S&P 500 as of 3/31/25.
SAM’s Energy Transition Portfolio generated a return (net of fees) of 17.4% and 10.9% for the periods since 4/29/21 inception and 1-year, respectively. This compares to a total return of 25.2% and 8.9%, respectively, for its customized benchmark and 41.4% and 8.3%, respectively, for the S&P 500 as of 3/31/25.
2025 Year-to-Date Total Return
Source: Bloomberg, NASDAQ and S&P Global
IMPORTANT DISCLOSURES
Siegel Asset Management Partners is a registered investment adviser located in Plainview, New York. The views expressed are those of Siegel Asset Management Partners and are not intended as investment advice or recommendation. This material is presented solely for informational purposes, and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. Information is obtained from sources deemed reliable, but there is no representation or warranty as to its accuracy, completeness, or reliability. All information is current as of the date of this material and is subject to change without notice. Third-party economic, market or security estimates or forecasts discussed herein may or may not be realized and no opinion or representation is being given regarding such estimates or forecasts. Certain products and services may not be available in all jurisdictions or to all client types. Unless otherwise indicated, Siegel Asset Management Partners' returns reflect reinvestment of dividends and distributions. Indexes are unmanaged and are not available for direct investment. Investing entails risks, including possible loss of principal. Past performance is no guarantee of future results.
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