“It was Clorox, IBM, Xerox. And the irony is that all of those companies through that 48% bear market in 73, 74, they all delivered on their earnings. Their earnings didn't skip a beat, but they still got annihilated because valuations, right? Inflation will kill valuations.”
The Compound and Friends · October 2026
Timmer, of Fidelity, on the early-1970s Nifty Fifty, the high-quality stocks institutions bought after retail investors had been wiped out. At the peak, he says, the top 50 traded at twice the price-to-earnings multiple of the other 450. He says the same pattern returned in the late 1990s, when the top 50 doubled their multiple from 20 to 40 while the rest of the market stayed at 20.
Transcript
so late 60s, then we had the recession, 1970, the retail investing public got wiped out. And then early 70s, it was institutions running money, including Fidelity. And PMs just wanted safe quality, high-quality stocks that were going to deliver earnings. And that was called the Nifty 50.
They were brands.
And it was like called. It was Clorox, IBM, Xerox. And the irony is that all of those companies through that 48% bear market in 73, 74, they all delivered on their earnings. Their earnings didn't skip a beat, but they still got annihilated because valuations, right? Inflation will kill valuations. And that's what happened. And At that extreme, the top 50 stocks were trading at 2x the PE of the bottom 450. Same thing happened in late 90s. From 1998, that LTCM moment, the meltup started. From that point, the top 50 doubled their PE from 20 to 40, while the rest of the market stayed at 20. That
was like Cisco, Microsoft, Intel.
Yeah. And that was another bubble. And then you had this massive rotation, but it was in a down market. Now we don't have the value. We never had the valuation extreme. 21. Well, yeah, 21, but that was for the whole market too. But, you know, even a year ago when the Mac 7 sort of lost its…
Can I ask you about this then? That's what the people that have been bearish, they've pivoted to. They said, no, no, no, you have it all wrong. You're thinking about 1999 and you're looking for an SP at 50 times earnings and it's not. And you're looking for a NASDAQ at 100 times earnings and it's…
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