Subject: Arezi Ratio for Jun 30
* 6/9 6/16 6/23 6/30/25
S&P 500 Index 6000.36 5976.97 5967.84 6173.07
Trailing 12 month PE 27.30 27.22 27.14 28.04
Trail Earnings yield 3.66% 3.67% 3.68% 3.57%
Forward 12 month PE 23.63 23.48 23.39 24.19
Fwd Earnings Yield 4.23% 4.26% 4.28% 4.13%
90 day tbill yield 4.43 4.45 4.39 4.39
10 year tbond yield 4.51% 4.41% 4.38% 4.29%
Arezi Ratio 1.21 1.21 1.19 1.23
Fed Ratio 1.07 1.04 1.02 1.04
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 May-Oct part of the year. - Bearish
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 28%.
An alternative allocation, using S=120-30*Arezi Ratio and the first
two of the other timing indicators, produces a target of 73%.
Elan