Subject: Arezi Ratio for Feb 5
* 1/15 1/22 1/29 2/5/24
S&P 500 Index 4783.83 4839.81 4890.97 4958.61
Trailing 12 month PE 24.92 25.27 25.74 25.99
Trail Earnings yield 4.01% 3.96% 3.89% 3.85%
Forward 12 month PE 22.05 22.08 22.31 22.62
Fwd Earnings Yield 4.54% 4.53% 4.48% 4.42%
90 day tbill yield 5.45 5.45 5.44 5.43
10 year tbond yield 3.96% 4.15% 4.15% 4.03%
Arezi Ratio 1.36 1.38 1.40 1.41
Fed Ratio 0.87 0.92 0.93 0.91
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 49%
stocks, 51% cash this week.
Other timing indicators:
The S&P index is above its 200DMA. - Bullish
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 29%.
An alternative allocation, using S=120-30*Arezi Ratio and the first
two of the other timing indicators, produces a target of 78%.
Elan