Subject: Arezi Ratio for Jun 16
* 5/26 6/2 6/9 6/16/25
S&P 500 Index 5802.82 5911.69 6000.36 5976.97
Trailing 12 month PE 26.31 26.77 27.30 27.22
Trail Earnings yield 3.80% 3.74% 3.66% 3.67%
Forward 12 month PE 23.01 23.37 23.63 23.48
Fwd Earnings Yield 4.35% 4.28% 4.23% 4.26%
90 day tbill yield 4.36 4.36 4.43 4.45
10 year tbond yield 4.51% 4.41% 4.51% 4.41%
Arezi Ratio 1.15 1.17 1.21 1.21
Fed Ratio 1.04 1.03 1.07 1.04
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 59%
stocks, 41% 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 29%.
An alternative allocation, using S=120-30*Arezi Ratio and the first
two of the other timing indicators, produces a target of 74%.
Elan