Subject: Arezi Ratio for Mar 17
* 2/24 3/3 3/10 3/17/25
S&P 500 Index 6013.13 5954.50 5770.20 5638.94
Trailing 12 month PE 27.82 27.59 26.56 25.98
Trail Earnings yield 3.59% 3.62% 3.77% 3.85%
Forward 12 month PE 23.45 23.13 22.39 21.87
Fwd Earnings Yield 4.26% 4.32% 4.47% 4.57%
90 day tbill yield 4.32 4.32 4.34 4.33
10 year tbond yield 4.42% 4.24% 4.32% 4.31%
Arezi Ratio 1.20 1.19 1.15 1.12
Fed Ratio 1.04 0.98 0.97 0.94
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 64%
stocks, 36% cash this week.
Other timing indicators:
The S&P index is below its 200DMA. - Bearish
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 34%.
An alternative allocation, using S=120-30*Arezi Ratio and the first
two of the other timing indicators, produces a target of 76%.
Elan