Subject: Arezi Ratio for Dec 2
* 11/11 11/18 11/25 12/2/24
S&P 500 Index 5995.54 5870.62 5969.34 6032.38
Trailing 12 month PE 29.08 28.37 28.76 28.95
Trail Earnings yield 3.44% 3.52% 3.48% 3.45%
Forward 12 month PE 24.42 23.89 24.16 24.33
Fwd Earnings Yield 4.10% 4.19% 4.14% 4.11%
90 day tbill yield 4.63 4.60 4.63 4.58
10 year tbond yield 4.30% 4.43% 4.41% 4.18%
Arezi Ratio 1.35 1.30 1.33 1.33
Fed Ratio 1.05 1.06 1.07 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 54%
stocks, 46% 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 34%.
An alternative allocation, using S=120-30*Arezi Ratio and the first
two of the other timing indicators, produces a target of 80%.
Elan