Subject: Arezi Ratio for Jul 1
* 6/10 6/17 6/24 7/1/24
S&P 500 Index 5346.99 5431.60 5464.62 5460.48
Trailing 12 month PE 27.42 27.81 28.29 28.23
Trail Earnings yield 3.65% 3.60% 3.53% 3.45%
Forward 12 month PE 22.92 23.22 24.24 24.14
Fwd Earnings Yield 4.36% 4.31% 4.12% 4.14%
90 day tbill yield 5.52 5.51 5.49 5.48
10 year tbond yield 4.43% 4.20% 4.25% 4.36%
Arezi Ratio 1.51 1.53 1.55 1.55
Fed Ratio 1.02 0.98 1.03 1.05
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 43%
stocks, 57% 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 13%.
An alternative allocation, using S=120-30*Arezi Ratio and the first
two of the other timing indicators, produces a target of 64%.
Elan