Subject: Arezi Ratio for Jan 22
* 1/1 1/8 1/15 1/22/24
S&P 500 Index 4769.83 4697.24 4783.83 4839.81
Trailing 12 month PE 24.61 24.34 24.92 25.27
Trail Earnings yield 4.06% 4.11% 4.01% 3.96%
Forward 12 month PE 21.68 21.62 22.05 22.08
Fwd Earnings Yield 4.61% 4.63% 4.54% 4.53%
90 day tbill yield 5.40 5.47 5.45 5.45
10 year tbond yield 3.88% 4.05% 3.96% 4.15%
Arezi Ratio 1.33 1.33 1.36 1.38
Fed Ratio 0.84 0.88 0.87 0.92
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 51%
stocks, 49% 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 31%.
An alternative allocation, using S=120-30*Arezi Ratio and the first
two of the other timing indicators, produces a target of 79%.
Elan