MLPs – Ready for a Steady Climb Upward?

It’s no secret that the US economy and Wall Street are in the throes of a major recession.  As a write this, the S&P 500 is down 37% in the last year, unemployment has skyrocketed above 8%, and the government continues to struggle with the fallout from the subprime lending nightmare.  The Master Limited Partnership universe has also suffered losses, with the benchmark Alerian MLP Index down about 35% over the last 12 months.

However, in my opinion, now is the time to start formulating an asset allocation plan for the next 5 years.  While the outlook for the economy does not look promising, I think the market has weathered the worst part of the storm (that’s not to say there won’t be some smaller rain clouds to come).  I also think that, liquidity issues aside, MLPs can be a beneficial part of that plan (if investors understand the tax implications).  So, stay tuned, and keep your eye on the ^AMZ index (already up 14% YTD) – I think there is fair (or at least “better”) weather ahead.