Subject: Arezi Ratio for Jun 9
* 5/19 5/26 6/2 6/9/25
S&P 500 Index 5958.38 5802.82 5911.69 6000.36
Trailing 12 month PE 27.05 26.31 26.77 27.30
Trail Earnings yield 3.70% 3.80% 3.74% 3.66%
Forward 12 month PE 23.70 23.01 23.37 23.63
Fwd Earnings Yield 4.22% 4.35% 4.28% 4.23%
90 day tbill yield 4.37 4.36 4.36 4.43
10 year tbond yield 4.43% 4.51% 4.41% 4.51%
Arezi Ratio 1.18 1.15 1.17 1.21
Fed Ratio 1.05 1.04 1.03 1.07
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 60%
stocks, 40% 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 normal. - Bullish
A composite allocation may start with the Arezi formula and subtract 10%
for each bearish indicator. The current target allocation is 40%.
An alternative allocation, using S=120-30*Arezi Ratio and the first
two of the other timing indicators, produces a target of 74%.
Elan