No. of Recommendations: 19
* 5/11 5/18 5/25 6/1/26
S&P 500 Index 7398.93 7408.50 7473.47 7580.06
Trailing 12 month PE 31.56 32.30 32.06 32.58
Trail Earnings yield 3.17% 3.10% 3.12% 3.07%
Forward 12 month PE 20.86 22.38 22.52 22.80
Fwd Earnings Yield 4.79% 4.47% 4.44% 4.39%
90 day tbill yield 3.69 3.69 3.68 3.69
10 year tbond yield 4.38% 4.59% 4.56% 4.45%
Arezi Ratio 1.16 1.19 1.18 1.20
Fed Ratio 0.91 1.03 1.03 1.01
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 60%
stocks, 40% 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 normal. - Bullish
A composite allocation may start with the Arezi formula and subtract 10%
for each bearish indicator. The current target allocation is 40%.
An alternative allocation, using S=120-30*Arezi Ratio and the first
two of the other timing indicators, produces a target of 74%.
Elan
