Subject: Arezi Ratio for Mar 31
* 3/10 3/17 3/24 3/31/25
S&P 500 Index 5770.20 5638.94 5667.56 5580.94
Trailing 12 month PE 26.56 25.98 26.11 25.63
Trail Earnings yield 3.77% 3.85% 3.83% 3.90%
Forward 12 month PE 22.39 21.87 21.93 21.55
Fwd Earnings Yield 4.47% 4.57% 4.56% 4.64%
90 day tbill yield 4.34 4.33 4.33 4.33
10 year tbond yield 4.32% 4.31% 4.25% 4.27%
Arezi Ratio 1.15 1.12 1.13 1.11
Fed Ratio 0.97 0.94 0.93 0.92
The Arezi Ratio is the 90 day tbill yield divided by the trailing
earnings yield of the S&P500. A low ratio means that stocks are undervalued.
The 'Fed Ratio' is the 10 year treasury bond yield divided by the
forward estimated operating earnings yield of the S&P500. A low ratio
means that stocks are undervalued. Thus, a ratio of 0.71 for example
means, according to Yardeni, that stocks are cheaper than 'fair value'
by 29%.
The 'S=120-50*Arezi Ratio' formula indicates an allocation of 65%
stocks, 35% cash this week.
Other timing indicators:
The S&P index is below its 200DMA. - Bearish
We are in the Nov-Apr part of the year. - Bullish
The trailing PE ratio of the S&P is above 17. - Bearish
The treasury yield curve is inverted. - Bearish
A composite allocation may start with the Arezi formula and subtract 10%
for each bearish indicator. The current target allocation is 35%.
An alternative allocation, using S=120-30*Arezi Ratio and the first
two of the other timing indicators, produces a target of 77%.
Elan