A measure of stock valuations called the Rule of 20 states that...

A measure of stock valuations called the Rule of 20 states that the stock market is fairly valued when the sum of the average price-earnings ratio and the rate of inflation is equal to 20.

That is, P/E + Inflation = 20

The stock market is deemed to be undervalued when the sum is below 20 and overvalued when the sum is above 20.

The obvious question is, what's the current "Rule of 20" value for the S&P 500?

Using a trailing price to earnings ratio value from the above plot of about 21, and a guesstimated official USA CPI outlook of say 6, that is, a guessed reduction from 8.5, the resulting "Rule of 20" value is 27.

This suggests that the S&P 500 is overvalued .

However, if we instead use older, less massaged methods of estimating CPI, as presented by Shadowstats as the blue line in the plot below, and again assuming some degree of moderation of the CPI into the future, the real near to medium term value of CPI might be say 14.



The resulting "Rule of 20" value for the S&P 500 becomes 21 + 14 = 35, which suggests significant overvaluation.

This may tend to support arguments that the bearish moves in stock prices that have taken place this year aren't over, despite the recent rally.

I'm not a financial adviser, this isn't financial advice, do your own research.