‘Rule of 20’ Leaves Room for More Gains in U.S. Stocks

U.S. stocks have room to advance relative to earnings under the “rule of 20,” Jeffrey Saut, Raymond James Financial Inc.’s chief investment strategist, wrote Thursday in a report. The gauge signals that shares are fairly valued when the price-earnings ratio for the Standard & Poor’s 500 Index and the inflation rate add up to 20. Based on projected profit and U.S. consumer prices, the total has been lower than 20 since 2010 and stood at 18.5 yesterday, according to data compiled by Bloomberg.