Rally skeptics and those with an affinity for crash prophecies spent the last couple of months cataloguing similarities between today’s US equity market and two bubbles: The dot-com boom and the 2021 speculative frenzy.

The comparison’s easy enough to make on a variety of metrics, and God knows I’ve spent enough time drawing bubble parallels this year.

More recently, some top-down strategists began enumerating the ways today’s market is different from 2000 and 2021. That happens when rallies refuse to die: People start looking to justify a bullish bent lest they should fall too far behind.

Last week, for example, BofA’s Savita Subramanian said comparing today’s S&P to yesteryear’s index is apples to oranges. Then she raised her price target.

In his latest, Goldman’s David Kostin noted that unlike 2021, extreme valuations aren’t a market-wide phenomenon. That’s not all Kostin said. In the same note, he talked a bit about the cost of capital, which is obviously quite a bit higher now than it was two and a half years ago.

“The low cost of financing meant growth plans could be funded relatively cheaply at the same time as a low discount rate benefited the valuations of growth stocks with cash flows in the distant future,” Kostin wrote, recalling 2021.

The figure above shows a ~200bps surge from multi-decade lows. That increase, Kostin said, compelled investors to “focus on profitability” not just growth on its own.

Goldman’s math suggests that in 2021, investors rewarded growth handsomely, bidding up valuations as expected FY2 sales growth increased. Valuations actually contracted when margins expanded, underscoring the extent to which profitability was an afterthought at best, and punished at worst.

The figure below shows the ebb and flow of what matters more to investors: Top-line growth or the bottom line (i.e., margins).

Suffice to say this is a different environment compared to the 2021 frenzy. “Today, both growth and margins are positively associated with valuations, but the multiple boost from an increase in net margins is greater than that from a similar increase in sales growth,” Kostin said.

He used Goldman’s basket of non-profitable tech stocks to drive home the point. That index returned nearly 90% from September of 2020 through February of 2021. It’s down 11% so far in 2024.