One of the most persistent clouds of anxiety weighing on sentiment in the last few years revolves around the sickening suspicion that stocks trading at exaggerated valuations are constantly teetering on the edge of bubble-bursting territory. As investors raised on the assumption that the S&P 500 is fairly valued at about 15X earnings and anything higher is getting rich, we’ve felt that chill ourselves as the market pushed past 19X and stayed there. Now, with stocks struggling to hold a 22X multiple some people are convinced that the world will end at any time.

The world could end at any time and yet the end has somehow stubbornly never managed to come. Despite our near-term note of caution below, we remain confident in U.S. companies and their power to keep delivering for shareholders. If that perspective is ever proved false, we’ll all have bigger things than our investment portfolios to worry about. And until that moment of reckoning, life is a whole lot better in the market than watching “safe” on the sidelines where you might never be at risk of losing money except when it comes to the inexorable pull of inflation draining our purchasing power year after year. At least in the market you might do well enough to overcome that pull, pay the bills and even get ahead. This is where wealth is created.

There’s a simple logic behind our confidence here. Companies that command premium valuations are dynamic. They’re run by people who aren’t satisfied with generating a certain amount of cash every quarter and protecting that enterprise from threats. Sure, they keep an eye on defense but their real job is growing the business. A certain amount of cash today turns into more cash tomorrow, even more a year from now. Historically, it was worth paying 15X earnings for companies that could raise the bottom line 10% a year because after you’d held on for that first year you were holding a bigger company that deserved to be worth more. A year after that, the company would be even bigger and people who were late to the game needed to pay a higher price to buy in.

The S&P 500 has traded at an average P/E of 19.8 over the past five years, which is now roughly the period of time we talk about when we say “the post-COVID era.” It includes the initial pandemic panic, the relief rally that followed, the zero-rate boom, the bear market triggered when the Fed started tentatively normalizing interest rates, the recovery and all the headlines we’ve seen in recent weeks. Five years ago, on the brink of the pandemic, the market traded at 18.9X earnings, or only a fraction below its current valuation. Was that multiple sustainable? The lockdowns and the Fed ensured that we’d never find out. Either way, we’re still here.

Almost three years ago, at the depths of the 2022 bear market misery, stocks dropped to 15.5X earnings. For someone raised to get nervous when the market multiple hit 15, it still felt a little rich, a little precarious. But hindsight suggests that it was actually closer to the lower limit Wall Street will tolerate in modern times before the buyers come back in from the sidelines. If you took a leap of faith and bought the market along with them, you’d be up 67% as a reward for your courage and your faith. The more growth you chased, the better you did. The moral here: companies that are growing fast are worth paying a higher price because they’ll grow into their valuations before your patience flags.

And the longer companies can extend their expansion, the more comfortable investors get with paying that growth premium. On average, the S&P 500 traded at about 15X earnings for the whole decade that started in 2010 and ended in 2020. That’s the old “normal,” reflecting historical growth rates. More recently, the rise of new technologies and more accommodating tax rates have given aggressive companies a long-term lift. At a glance, they’re going to raise the bottom line 12-13% this year and again next year. That’s accelerated. Four extra points of growth are worth an extra point of P/E.

If that’s too rich for you, you are welcome to lock in 4% long-term bond yields that might earn 1% more than inflation over the next decade. Once upon a time, you could have scraped a little more income than that from CDs or money market accounts, but after last year’s rate cuts most of those opportunities have reset at lower levels or vanished outright. To get a higher absolute return on your money, a little tolerance for risk is required. And in that scenario, there’s no better place to be than stocks like ours.