Subject: Arezi Ratio for Apr 1
* 3/11 3/18 3/25 4/1/24
S&P 500 Index 5123.69 5117.09 5235.15 5254.35
Trailing 12 month PE 26.46 26.49 27.10 27.24
Trail Earnings yield 3.78% 3.78% 3.69% 3.67%
Forward 12 month PE 22.89 22.68 23.20 23.24
Fwd Earnings Yield 4.37% 4.41% 4.31% 4.30%
90 day tbill yield 5.46 5.48 5.46 5.46
10 year tbond yield 4.09% 4.31% 4.22% 4.20%
Arezi Ratio 1.44 1.45 1.48 1.49
Fed Ratio 0.94 0.98 0.98 0.98
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 46%
stocks, 54% 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 26%.
An alternative allocation, using S=120-30*Arezi Ratio and the first
two of the other timing indicators, produces a target of 75%.
Elan