GOLDMAN: Here Are 4 Reasons Why You Can't Say The Stock Market Is A Bubble

This discrepancy has more and more people freaked out that the stock market might be in a bubble.

Yes, stock market valuations may be getting pricey.

But Goldman Sachs' Sharmin Mossavar-Rahmani and Brett Nelson don't think stocks are in a bubble.

They think bubble-like conditions exist when the price of an asset "deviates significantly from the underlying value of the asset based on a reasonable set of assumptions about the future drivers of fundamental value, such as growth, inflation, and policy."

They see four key signs that this isn't happening:

1. Credit growth isn't excessive. In fact, credit growth was up 4.4% year-over-year according to the latest measure, and this is below the average of 7.3% since 1947. "We believe we need to see faster credit growth and, at least, an increase in the velocity of money for some extended period of time before we become concerned about bubble conditions."
2. Investor flows into stocks have not been excessive. Inflows only turned positive for the first time in Q1 2013, after five years of outflows.
3. U.S. sentiment could still improve. "While sentiment toward the US has improved, we believe it still has further to go before matching our view of US preeminence expressed in our 2010-13 Outlooks, which outline the nation's unique combination of economic, institutional, human capital and geopolitical strengths. This lagging sentiment implies that we have not yet reached bubble territory."
4. Valuations are not in bubble territory. "While valuations are quite expensive and certainly imply lower returns over the next five years, normalization of valuations over time does not imply "implosion" or even negative annual returns. Furthermore, our economic outlook supports our moderate earnings-per- share growth expectation of approximately 6% for 2014. Therefore, based on our view of a reasonable set of assumptions, equity valuations have not deviated from intrinsic value significantly enough to be in bubble territory."

Goldman's base case is for a 3% return on the S&P 500 in 2014. Mossavar-Rahmani and Nelson told the firm's private wealth clients to "stay fully invested at their strategic allocation to U.S. equities."