Monday, November 9, 2026
History shows us how sudden increases in inflation can destroy bull markets.
For example, in 1972 investors believed the “Nifty Fifty” could never fail. This was a group of about 50 large, “blue-chip” companies that would grow forever.
They included Polaroid, Xerox, McDonald’s, Disney, and more. Their shares were all unstoppable, justifying almost any price point. This group traded at about 42 times earnings compared with roughly 19 times for the S&P 500.
Then the “Nifty Fifty” fell apart due to several factors including inflation, economic policy, and currency devaluation. The S&P 500 lost about 48% from its peak in January 1973 to its low in October 1974.
It was a large, stunning fall. And I think the AI trade is approaching a similar reckoning.
Increasing material and energy costs threaten profit margins. Rising interest rates threaten project financing. And it could all spiral further.
See, expensive stocks leave investors with no margin for error. And what I’m seeing looks more like 1972 every day.
Before the 1972 election, President Nixon pressured Federal Reserve Chairman Arthur Burns to pursue expansionary monetary policy. Sound familiar? President Trump tried to indict the last chairman, and he demanded that interest rates fall to 1% or less.
In 1972, Congress financed the Vietnam War in the expansion of domestic programs instead of paying them with current revenue. That led to inflation and the market crash.
Back then, federal deficits only equaled about 2% of the economy. Today, our deficits are three times bigger, close to 6% of gross domestic product this year.
So, it’s looking like the 1970s again in some bad ways. If things continue, the AI-led market could tumble.
Daniel A. White is an investment advisory representative of and provides advisory services through CoreCap Advisors, LLC. Daniel A. White & Associates and CoreCap Advisors are separate and unaffiliated entities.