Earlier this week, The Wall Street Journal ran an article with the headline “Why This Frothy Market Has Me Scared.” The author cited a number of indicators that have him worried, including a survey of investor optimism that is at a 35-year high. Investors, the Journal said, are feeling “euphoric,” and that’s often a bad sign. So as we head into year-end, it’s worth taking stock of where things stand.

The stock market has returned nearly 25% so far this year. That’s on top of a 24% gain last year. Over the past five years, even including the 34% decline in 2020 when Covid arrived, and another double-digit decline in 2022, the S&P 500 has risen more than 85%. On a valuation basis, the price-to-earnings ratio of the S&P now stands at about 22—far above its 40-year average of 16.

It’s figures like this that are giving some observers a fear of heights. Those who are particularly worried point to the crash that followed the peak in 1929 and ask why something like that couldn’t happen again today. During that unpleasant period, the Dow Jones Industrial Average slid 89% and didn’t fully recover until 1954.

While anything is possible, there are several structural reasons why, in my view, today’s market is unlikely to experience a decline of that magnitude.

Perhaps the most significant difference is that in 1929 there was no Securities and Exchange Commission to maintain order in the markets. The SEC was actually created in response to the 1929 crash and didn’t open its doors until 1934. But today the SEC exercises broad authority, policing public company disclosures, monitoring for insider trading and regulating investment advisory firms. While there will always be some number of hucksters peddling poor investments, the SEC works hard to root them out. By contrast, in 1929, investment markets were more like the wild west. In the eight years prior to the crash, the Dow Jones index rose six-fold, driven by unhealthy speculation.

Among the regulatory rules that have been tightened since the 1920s: margin requirements. Before the crash, investors were able to purchase stocks “on margin” in a way that is no longer allowed today. Under the prevailing rules then, an investor could borrow up to 90% of the purchase price of a stock. The result: If that stock declined just 10%, the investor would be wiped out and forced to sell. In a bear market, when there is already downward pressure, these kinds of forced sales can accelerate the decline, and that was a key factor in 1929. While investors can still borrow on margin today, borrowing is limited to just 50%, rather than 90%.

The Federal Reserve also provides stability today in ways that it didn’t back in the 1920s. In his book on the founding of the Federal Reserve, Roger Lowenstein illustrates how different our economy was then. He describes a German immigrant named Paul Warburg, who came to the United States in 1902. Having experience with the European system, which at the time was more developed, Warburg was surprised to find that the U.S. didn’t have something as basic as a central bank to maintain stability in the system. Warburg compared the banking system in the U.S. to a town without a fire department, with each bank left to fend for itself. In 1907, when a recession caused hundreds of banks to fail, many came to appreciate Warburg’s warning, and his efforts led to the creation of the Fed in 1914.

Thus, the Fed did exist in 1929, but its mandate then was very narrow: to protect the banking system against a repeat of what had happened in 1907. But in the years since, the Fed’s mandate has expanded. In fact, if you consult its governing document today, you’ll see that it now views as its first responsibility maintaining a stable employment level—to help prevent financial calamities, in other words, and to help minimize them when they do happen.

With the ability to essentially print money, the Fed has enormous firepower to head off crises, especially since the money supply is no longer constrained by the gold standard, as it was in the 1920s. As Roger Lowenstein has put it, there’s now an organization to “lean against the wind” in a way that didn’t exist in 1929. We saw that most recently in the spring of 2020. With a single press release, the Fed rolled out a set of policy actions to help lift the economy out of recession. On that day, the stock market turned positive and began its recovery.

As a result of past crises like this, policymakers today have more experience to draw on. They’re better equipped to handle crises today because of mistakes that were made in the past. In 1932, for example, Herbert Hoover raised taxes in an effort to shore up government finances, making life harder for people struggling through the Depression. What we know today, of course, is that the government should do the opposite during crises. It should run deficits to help support the economy. It’s doubtful a future president would make the same mistake.

Another difference between 1929 and today: Investors’ portfolios are more diversified. The first mutual fund got its start only in 1924, so in 1929, most investors still held concentrated portfolios of individual stocks. Today, investors have access to a wide range of investment options and are able to diversify broadly at low cost. This, in my view, reduces volatility and is another factor that makes today’s market less susceptible to panic.

A related, and final factor: In the 1920s, the technology underpinning markets was primitive. Stockbrokers worked by telephone, and when the market began to drop in 1929, brokers couldn’t keep up with the volume of orders. This led to delays and errors in executing orders. According to accounts of that period, this compounded the panic and made matters worse.

To be sure, markets will always be vulnerable to crises, because human nature today is fundamentally the same as it was 100 years ago. But nearly everything else has changed, and for that reason, I don’t see the risk of a 1929-style decline being one that should keep us up at night.