Subject: Arezi Ratio for Sep 25
* 9/4 9/11 9/18 9/25/23
S&P 500 Index 4515.77 4457.49 4450.32 4320.06
Trailing 12 month PE 24.34 23.97 23.87 23.14
Trail Earnings yield 4.11% 4.17% 4.19% 4.32%
Forward 12 month PE 21.00 20.68 20.58 19.91
Fwd Earnings Yield 4.76% 4.83% 4.86% 5.02%
90 day tbill yield 5.53 5.55 5.56 5.56
10 year tbond yield 4.18% 4.26% 4.33% 4.44%
Arezi Ratio 1.35 1.33 1.33 1.29
Fed Ratio 0.88 0.88 0.89 0.88
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 56%
stocks, 44% cash this week.
Other timing indicators:
The S&P index is above its 200DMA. - Bullish
We are in the May-Oct part of the year. - Bearish
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 26%.
An alternative allocation, using S=120-30*Arezi Ratio and the first
two of the other timing indicators, produces a target of 71%.
Elan