Everything in the stock market is cyclical. As a result, we often find ourselves comparing the current business and market cycles to previous cycles to help us get a sense of where we might be going and also to provide us with the explanations we crave. On most metrics, current market valuation levels are fairly excessive vs. previous cycles. This dynamic creates concern among many and results in repeated caution and warnings. Having an adequate level of caution and awareness at all points of a market cycle is absolutely necessary but being overly cautious can lead to a misallocation of capital and frustrating investment returns.

What if the composition of market valuations and growth today is different than it was 20 or 30 or even 40 years ago? It certainly seems plausible given the dramatic changes that have occurred in the economy in the past 20 years.

Jeff Saut, Chief Investment Strategist at Raymond James, recently made this very point in a note to clients. Saut, an outspoken believer in the current bull market, posits valuations aren’t all that expensive. He points out there are more high growth companies in the S&P 500 than ever before, justifying a higher overall multiple. Additionally, he points out the average P/E ratio for the S&P 500 has been over 20 times earnings since 1990. He attributes at least some of this higher growth orientation to more tech companies that don’t have the significant levels of tangible assets on their balance sheets that the “old industrial stocks of the past” had.

Saut believes the market has more room to run from here as we are in “unprecedented times”.

So, while we can gain valuable perspective from historical comparisons we have to be careful we don’t excessively anchor ourselves to historical results while underweighting or even ignoring meaningful changes in the composition of valuation and growth dynamics that may actually provide useful insight for current conditions and potentially even a roadmap forward.