Subject: Arezi Ratio for Apr 22
* 4/1 4/8 4/15 4/22/24
S&P 500 Index 5254.35 5204.34 5123.41 4967.23
Trailing 12 month PE 27.24 27.10 26.64 26.02
Trail Earnings yield 3.67% 3.69% 3.75% 3.84%
Forward 12 month PE 23.24 22.94 22.56 21.72
Fwd Earnings Yield 4.30% 4.36% 4.43% 4.60%
90 day tbill yield 5.46 5.43 5.45 5.45
10 year tbond yield 4.20% 4.39% 4.50% 4.62%
Arezi Ratio 1.49 1.47 1.45 1.42
Fed Ratio 0.98 1.01 1.02 1.00
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 77%.
Elan