Defying pundits, the US benchmark stock index S&P 500 rose sharply after the Republican candidate Donald Trump secured victory in the November 8th election. Despite the recent correction, the stock index is up by almost 10 percent since the election result. S&P 500 is currently trading at 2346. The index is in its ninth year of Bull Run; hence some investors worry that it might be well overvalued. Here in this article, we would use oil price to measure S&P 500 valuations based on historical data.

• Historically speaking, one unit of S&P 500 has bought about 23.1 barrels of crude oil. Currently, it buys about 49 barrels of WTI oil and 46 barrels of Brent Crude. This measure suggests that S&P 500 is overvalued or the oil is undervalued by more than two-fold, compared to history.

While this valuation is not certainly an indicator that the index might decline, but it strongly suggests that this ratio will be going through mean reversion at one point.