No. of Recommendations: 16
* 11/24 12/1 12/8 12/15/25
S&P 500 Index 6602.99 6849.09 6870.40 6827.41
Trailing 12 month PE 27.61 28.57 28.62 28.38
Trail Earnings yield 3.62% 3.50% 3.49% 3.52%
Forward 12 month PE 23.67 24.47 24.47 24.24
Fwd Earnings Yield 4.23% 4.09% 4.09% 4.12%
90 day tbill yield 3.90 3.88 3.71 3.63
10 year tbond yield 4.06% 4.02% 4.14% 4.19%
Arezi Ratio 1.08 1.11 1.06 1.03
Fed Ratio 0.96 0.98 1.01 1.02
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 68%
stocks, 32% 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 normal. - Bullish
A composite allocation may start with the Arezi formula and subtract 10%
for each bearish indicator. The current target allocation is 58%.
An alternative allocation, using S=120-30*Arezi Ratio and the first
two of the other timing indicators, produces a target of 89%.
Elan
