Subject: Arezi Ratio for Jun 24
* 6/3 6/10 6/17 6/24/24
S&P 500 Index 5277.51 5346.99 5431.60 5464.62
Trailing 12 month PE 27.11 27.42 27.81 28.29
Trail Earnings yield 3.69% 3.65% 3.60% 3.53%
Forward 12 month PE 22.68 22.92 23.22 24.24
Fwd Earnings Yield 4.41% 4.36% 4.31% 4.12%
90 day tbill yield 5.46 5.52 5.51 5.49
10 year tbond yield 4.51% 4.43% 4.20% 4.25%
Arezi Ratio 1.48 1.51 1.53 1.55
Fed Ratio 1.02 1.02 0.98 1.03
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 42%
stocks, 58% 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 12%.
An alternative allocation, using S=120-30*Arezi Ratio and the first
two of the other timing indicators, produces a target of 63%.
Elan