Market Commentary: The More Things Change, the More Things Stay the Same
- Yves Siegel
- Dec 28, 2025
- 9 min read
Happy Holidays and all the best for the new year! We appreciate all your support and help in making 2025 another successful year for Siegel Asset Management (SAM) Partners.
So, what changed in 2025? OPEC aggressively increased oil production to regain market share rather than continue to support oil prices—this was a bit of a surprise. Less surprising was the Trump’s administration’s support for fossil fuels, resumption of liquefied natural gas (LNG) export approvals, and reversal of clean energy initiatives.
And what didn’t change? The artificial intelligence (AI)/data center story continued to dominate the stock market. Natural gas became even better recognized as integral to fueling power demand. Companies within the energy sector maintained financial discipline. And our bullish stance on the midstream energy sector remained intact.
OUR BOTTOM LINE HAS NOT CHANGED. Investors will be well served over the long-term by allocating a portion of their equity portfolios to energy—particularly given the long runway of growth tied to global electrification, population growth, and the lifting of indigenous regions out of energy poverty. At SAM Partners, we continue to see a bright future for companies participating in the natural gas value chain (including natural gas liquids, or NGLs), utilities, and selectively in clean energy. If the U.S. is to win the AI technology race, it will need to produce energy that is available, affordable and cleaner. This will require more natural gas, more renewables, and more energy infrastructure.
“MAKE U.S. ENERGY GREAT AGAIN” DID NOT TRANSLATE INTO HIGHER STOCK PRICES
Our 2024 year-end market commentary headline read, “Make U.S. Energy Great Again.” While the Trump administration has adopted a very favorable domestic energy stance, the energy sector’s total return (price appreciation plus dividends) once again trailed the broader equities market. In our view, this was primarily driven by lower oil prices. After a stellar 2024—in which it the midstream sector generated a total return of ~43%—the Alerian Midstream Index (AMNAX) posted a year-to-date return of just 2.7%.*
Somewhat counterintuitively, clean energy stocks bounced back strongly in 2025 despite the U.S. withdrawal from the Paris Agreement and reduced tax credits for wind and solar. The clean energy sector outperformed the overall market, generating a year-to-date total return of 47.3% as measured by the S&P Global Clean Energy Transition Index (SPGTCLTR). Less surprising is the solid performance of the utilities sector given the inflection in power demand growth. The sector has generated a year-to-date total return of 16.1% as measured by the Philadelphia Stock Exchange Utility Index (XUTY).
*As of December 19, 2025.
A GLANCE BACK AT 2025
Trump ended war on fossil fuels. On January 20, 2025, President Trump issued an executive order declaring a “national energy emergency” (see our February 2025 and November 2025 market commentaries for details).
The Big Beautiful Bill was passed. Lower taxes and 100% bonus depreciation should spur economic growth and increased capital spending in 2026 and beyond (see our July 2025 market commentary for details).
S&P 500 performance. The S&P 500 was up 16.2%, with a total return of 17.7% year-to-date*, following a 25.0% return in 2024 and 26.3% return in 2023. Growth stocks, particularly technology continued to lead the way.
Russell 1000 growth outperformed value stocks again. This year marks the third consecutive year of outperformance. The Russell 1000 Growth Index gained 18.0% year-to-date, beating the Russell 1000 Value Index, which was up 13.4%.*
Russel 1000 Value vs. Growth YTD Performance
OPEC caught markets off guard. The group announced that it would accelerate the unwinding of its voluntary production cuts by increasing production by 411,000 barrels per day in May instead of the scheduled 137,000 barrels per day (see our April Quick Hit for details). Year-to-date, OPEC+ has agreed to ~2 MMBbls/d of cumulative production increases; albeit actual production increases have lagged at ~1.3 MMBbls/d. OPEC plans to pause production increments in Q1’26 given “current market conditions” but still plans to return 1.65 MMBbls/d of voluntary production cuts to the market in 2026.
OPEC+ 2025: Cumulative Agreed vs. Actual Production Increases
Energy sector lagged...again. For the second year in a row, the energy sector disappointed despite the election of a pro-energy President. The sector generated a positive return of 6.2% but still finished near the bottom of the pack. According to a Morningstar study, there is no clear relationship between the political party in power and energy equity performance. Valuation, not a President is a better indicator of how energy is likely to perform.
Year-to-Date Return by S&P 500 Sector (12/19/25)
U.S. oil and natural gas production reached record highs. Primarily due to greater productivity and efficiencies, crude oil and natural gas production reached new record highs. According to the EIA, average crude production this year is projected to grow by 380,000 bpd to 13.6 million barrels per day, and natural gas production is forecasted to average 108 bcf/d, up 4.5% for the year. Coal production, though not close to record high, looks to have grown by more than 5% according to the EIA.
Oil went down; natural gas went up. Relative to 2024 year-end levels, crude oil prices are down ~23%, currently hovering around ~$56 per barrel while natural gas prices are up ~8% at ~$3.65 per MMBtu. Incremental OPEC+ supply to maintain market share and China’s economic slow-down have dampened crude oil prices. Natural gas prices have benefitted from increased demand from LNG exports and power electrification.
Crude oil and natural gas prices YTD 2025
Source: EIA
Gasoline prices below $3 per gallon. U.S. retail gasoline prices ($2.90 per gallon) are down about 4% relative to this time a year ago and at the lowest level since the pandemic. Noteworthy, crude oil prices account for about 50% of the gasoline price, followed by marketing, taxes and refining costs. (We probably should thank OPEC :)).
A LOOK AHEAD AT 2026
1. Look for more modest stock market gains. Most market pundits believe that the bull run in stocks can continue, but with more modest gains and better performance from other sectors beyond technology.
2. Excess supply likely to keep lid on oil prices. Expected production growth of close to 3 million barrels per day will outstrip projected demand growth of less than 1 million barrels per day depending on the source. (OPEC is projecting demand growth of 1.3 million barrels per day). Persistent geopolitical risk may put a floor on prices.
3. Midterm elections will be hotly contested. More legislative gridlock is likely to occur, especially if the Republicans lose the House as recent polling may suggest.
4. Permit reform (a bi-partisan issue) may finally get legislated. It has become widely recognized that to win the AI race there needs to be permit reform to ensure that ever greater power demand can be met. This will necessitate infrastructure getting built in a more expedited process, hence permit reform.
5. New fed chair likely to endorse further rate cuts and easier monetary policies. However, the Fed’s December update of its dot plot shows a median projection of just one 25 basis points (bp) rate cut in 2026 suggesting a fed funds rate of 3.25 to 3.5%. Core inflation falls to 2.5% but doesn’t reach the fed’s 2.0% target until 2028. Real GDP grows by 2.3% from ~1.7% this year.
6. Natural gas and AI continue to be dominant investment themes. More natural gas is needed to satisfy the rising power consumption from AI/data centers and onshoring, as well as to meet power needs globally via LNG exports. We continue to favor midstream companies that are leading beneficiaries of the visible domestic and global secular growth in natural gas demand. Midstream energy provides the infrastructure to support AI and the buildout of data centers. Like 2024–25, we expect natural gas and AI to continue to be key performance drivers in 2026.
7. Improvement in ROIC justifies higher valuations. Midstream companies have exhibited disciplined growth, strong balance sheets, attractive and higher returns on investments (see chart below), and returning more cash to shareholders through dividends and stock buyback.
Returns on Invested Capital Over Time
We believe these factors justify higher valuations moving forward. Midstream continues to trade below historical multiples. Midstream c-corps and MLPs trade at median EV-to-EBITDA of 10.3x and 8.9x, both below ten-year averages of 11.0x and 9.7x, respectively, according to Wells Fargo Securities.
Midstream energy returns should be very competitive. Against the backdrop of expected normalized stock returns next year, midstream energy stocks should provide competitive returns given yield plus dividend growth approximating low double-digit returns.
Energy weighting in S&P 500 poised to increase. We anticipate energy stocks to be supported by relatively stable crude oil prices, Fed interest rate cut(s), and GDP growth. As noted in the next chart, the current weighting of 2.8% is only slightly above the historical low of 2.1% and materially below the median of 8.2% for the 1989-present time period.
Energy Sector Weighting in the S&P 500
Source: Wells Fargo Midstream Monthly Outlook: December 2025 published on 12/2/25
Note: "High", "Average", "Median" and "Low" metrics in the grey box are based on data for the entire period (1989-present).
LNG could be oversupplied by 2027. Global LNG supply may outstrip demand for several years as 100+ million tons per year (MTPA) enters the market. However, it is important to differentiate among LNG companies such as Cheniere Energy, Inc. (NYSE: LNG) that has 95% of its capacity committed under long-term contracts and has little commodity exposure and other companies that may have spot market exposure.
NOVEMBER REVIEW: ENERGY OUTPERFORMS MARKET
The rundown:
In November, SAM’s Infrastructure Income Portfolio produced a return (net of fees) of 6.9% compared to 0.2% for the S&P 500 and 3.4% for its customized benchmark. Year-to-date, SAM’s Infrastructure Income Portfolio produced a return (net of fees) of 7.6% compared to 17.8% for the S&P 500 and 17.9% for its customized benchmark. The performance relative to benchmark reflect our overweight in midstream and lower weights in the utilities and clean energy sectors.
In November, SAM’s Energy Transition Portfolio generated a return (net of fees) of 4.3% versus 1.3% for its customized benchmark. Year-to-date, SAM’s Energy Transition Portfolio generated a return (net of fees) of 8.0% versus 30.6% for its customized benchmark.
SAM’s portfolios are more heavily weighted in Midstream, which outperformed relative to the clean energy and utilities sectors in November and underperformed these sectors year-to-date.
Midstream outperformed the overall market and was up in November with a total return of 5.7% as measured by the AMNAX. On a year-to-date basis, midstream underperformed the market with a total return of 5.3%.
In November, the clean energy sector underperformed the overall market, generating a total return of -2.0% as measured by the S&P Global Clean Energy Index (SPGTCLTR). For the month, utilities outperformed with a total return of 2.1% as measured by the Philadelphia Stock Exchange Utility Index (XUTY). Year-to-date, SPGTCLTR and XUTY generated total returns of 50.7% and 23.1%, respectively.
Sector performance in the S&P 500 was largely positive with eight out of eleven sectors posting positive performance. Healthcare was the best performer and Technology was the worst. Energy delivered a 2.5% monthly total return. November month-end WTI crude oil and Henry Hub natural gas prices were $58.58 Bbl and $4.59 per MMBtu, down ~-5% and up ~29%, respectively from last month.
RESULTS: SINCE INCEPTION & ONE YEAR
SAM’s Infrastructure Income Portfolio produced a return (net of fees) of 147.8% and 0.6% for the periods since 11/10/20 inception and 1-year, respectively. This compares to a total return of 138.3% and 10.0%, respectively, for its customized benchmark and 108.2% and 15.0%, respectively, for the S&P 500 as of 11/28/25.
SAM’s Energy Transition Portfolio generated a return (net of fees) of 33.5% and 1.0% for the periods since 4/29/21 inception and 1-year, respectively. This compares to a total return of 40.4% and 21.6%, respectively, for its customized benchmark and 74.0% and 15.0%, respectively, for the S&P 500 as of 11/28/25.
2025 Year-to-Date Total Return as of 11/28/25
Sam Partners’ Infrastructure Income and Energy Transition Strategies seek to provide sustainable income and growth with capital preservation. This is accomplished by investing in a concentrated portfolio of high-quality midstream energy companies, utilities and clean energy companies that are well positioned to participate in the energy transition to a net zero carbon future. A diversified approach to investments across these sectors should optimize risk-adjusted returns, in our view. Our Infrastructure Income Strategy offers investors a current yield of ~4.5% and growth potential of ~5-7%; while the Energy Transition Strategy that is more heavily weighted with clean energy stocks and aligns with favorable ESG ratings, offers investors a current yield of ~3.5%. In a world searching for yield, we believe these Strategies offer a compelling value proposition.
IMPORTANT DISCLOSURES
Siegel Asset Management Partners is a registered investment advisor 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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