Subject: Arezi Ratio for Apr 28
* 4/7 4/14 4/21 4/28/25
S&P 500 Index 5074.08 5363.36 5282.70 5525.21
Trailing 12 month PE 23.24 24.62 23.81 24.82
Trail Earnings yield 4.30% 4.06% 4.20% 4.03%
Forward 12 month PE 19.54 20.77 19.57 20.42
Fwd Earnings Yield 5.12% 4.81% 5.11% 4.90%
90 day tbill yield 4.28 4.34 4.34 4.32
10 year tbond yield 4.01% 4.48% 4.34% 4.29
Arezi Ratio 0.99 1.07 1.03 1.07
Fed Ratio 0.78 0.93 0.85 0.88
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 66%
stocks, 34% 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 36%.
An alternative allocation, using S=120-30*Arezi Ratio and the first
two of the other timing indicators, produces a target of 78%.
Elan