Rule of 20: Is the Stock Market Fairly Valued?

By one method of stock valuation, U.S. equities have room to run

Rule of 20: Is the Stock Market Fairly Valued?
Looking at the market's average price-earnings ratio and the rate of inflation

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. Above that level, stocks begin to get expensive; below it, they’re bargains.

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