Manley on the Street

“… what mighty contests spring from trivial things …” —Alexander Pope
“There’s many a slip ‘twixt the cup and the lip.”
—English proverb

I’d like to make a few observations on two things I noticed last week.

First, bottom-up consensus forward earnings expectations slipped last week, and that is not a good thing. However, it’s not exactly bad either. The number declined only about $0.07 per share. Still, the movement is in the wrong direction, and most of the decline was caused by reductions in 2016 expectations. There are still no blatant signs of an economic meltdown, so I remain skeptical of a violent slowdown but vigilant for its early indicators.

Second, the biotech group was hard-hit during the week. The most given reason and the probable cause were comments by Hillary Clinton about a steep price increase in the cost of a certain HIV drug. Given the very high valuations placed on many companies in the biotech space, the decline was not unreasonable, in my opinion. Very little is needed to knock extended equities down.