Subject: Arezi Ratio for Apr 24
* 4/3 4/10 4/17 4/24/23
S&P 500 Index 4109.31 4105.02 4137.64 4133.52
Trailing 12 month PE 23.88 23.82 23.93 23.83
Trail Earnings yield 4.19% 4.20% 4.18% 4.20%
Forward 12 month PE 19.73 19.75 19.86 19.80
Fwd Earnings Yield 5.07% 5.06% 5.03% 5.05%
90 day tbill yield 4.85 4.91 5.14 5.14
10 year tbond yield 3.48% 3.30% 3.52% 3.57%
Arezi Ratio 1.16 1.17 1.23 1.22
Fed Ratio 0.69 0.65 0.70 0.71
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 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 39%.
An alternative allocation, using S=120-30*Arezi Ratio and the first
two of the other timing indicators, produces a target of 83%.
Elan