Subject: Arezi Ratio for Nov 6
* 10/16 10/23 10/30 11/6/23
S&P 500 Index 4327.78 4224.16 4117.37 4358.34
Trailing 12 month PE 22.81 21.93 21.36 22.49
Trail Earnings yield 4.38% 4.56% 4.68% 4.45%
Forward 12 month PE 19.36 18.96 18.59 19.79
Fwd Earnings Yield 5.16% 5.27% 5.38% 5.05%
90 day tbill yield 5.62 5.58 5.59 5.53
10 year tbond yield 4.63% 4.93% 4.84% 4.57%
Arezi Ratio 1.28 1.22 1.19 1.24
Fed Ratio 0.90 0.93 0.90 0.90
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 58%
stocks, 42% 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 38%.
An alternative allocation, using S=120-30*Arezi Ratio and the first
two of the other timing indicators, produces a target of 83%.
Elan