Subject: Arezi Ratio for Apr 27
* 4/6 4/13 4/20 4/27/26
S&P 500 Index 6582.69 6816.89 7122.81 7165.08
Trailing 12 month PE 28.21 29.28 30.24 30.54
Trail Earnings yield 3.54 3.42% 3.31% 3.27%
Forward 12 month PE 21.19 21.19 20.68 20.68
Fwd Earnings Yield 4.72% 4.72% 4.84% 4.84%
90 day tbill yield 3.71 3.69 3.70 3.69
10 year tbond yield 4.35% 4.31% 4.26% 4.31%
Arezi Ratio 1.05 1.08 1.12 1.13
Fed Ratio 0.92 0.91 0.88 0.89
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 64%
stocks, 36% 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 54%.
An alternative allocation, using S=120-30*Arezi Ratio and the first
two of the other timing indicators, produces a target of 86%.
Elan