Subject: Re: OT: S&P 500 Valuation
It might be, but I wouldn't bet on it.
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You should. Because your analysis did not include the composition of the US stock market by market cap.
I have a slight hunch that it's different than the railroads and utilities that dominated in the early 1900s (OP). Or industrials and consumer staples in the 50s and pharmas and WalMart in the 80s (your period).
Tech companies are qualitatively different in their "raw materials" and "widgets" and "sales". It's hard to see why old rules based on flesh-and-blood products should apply.

It's a popular narrative, but personally I don't really buy it as key main explanatory factor, other than in the rounding error. It's rarely good to go too far down the "it's different this time" road.
(also, my comments are about the corporate sector as a whole and their sales and profits...market cap doesn't come into it)

To be sure, I absolutely agree that there are some "new economy" firms with substantial output and extraordinary net margins. But that isn't the only story in the world.

Things one might consider:

Though there are some big tech firms that have very high net margins (most of them, other than Amazon), their fraction of headlines is much higher than their fraction of the economy. A lot of pretty ordinary stuff still happens, but doesn't get much press. The US manufacturing sector is bigger in real terms than it has ever been before (just a pinch down from the all time high set a year ago).

The huge drop in corporate tax rates is kind of staring us in the face.
Ditto real interest rates.

There is some "push down there, pop up there" effect at work. There is only so much GDP to be divvied up. If some corporates are getting an outsized piece of the profit pie by having glowing business models, it's likely at least partly at the expense of other firms, not just pesky things like workers and tax. Verisign is fantastic at 48%, but don't forget (say) the New York Times now down to 7%. The margins of a whole lot of once-formidable retailers and publishers have been crushed like bugs by the internet. But both groups participate in the averages. I think the killer economics of (say) Apple are more explanatory about how they eat their previous-era competition than about how that explains the larger size of the overall corporate profit pie.

The numbers don't seem to support it.
For example, an average of 20.4% of medium-to-large non-financial firms had net profit margins over 10% 1986-2004.
Since then (a period covering the credit crunch and the pandemic), 33.0% of firms are managing that level of net margin on average.
There just aren't enough tech "it's different this time" wunderkinder to come close to explaining that sort of rise in the breadth of the trend to higher net margins.

It has always been the case that companies will charge whatever they can get away with, and pay as little as they can get away with to get that done. It's not something new. If US companies--both giants and tiddlers--are getting much better at getting a bigger slice of the GDP pie, I think the Occam's razor explanation is that their power is simply now relatively greater relative to the other competitors (mainly labour and tax, also lenders) than used to be the case.
Interestingly, the next largest factor is probably the cost of materials, which for a variety of reasons has oil as a good proxy metric. The average real price of oil has been much lower in the last 20 years than in the prior 20, so that strengthens the argument of the relative weakening of labour and tax in the fight for pie.

Jim