Arezi Ratio for Apr 18


*                         3/28     4/4      4/11     4/18/22
S&P 500 Index             4543.06  4545.86  4488.28  4392.59
Trailing 12 month PE      22.80    22.80    22.48    22.11
Trail Earnings yield      4.39%    4.39%    4.45%    4.52%
Forward 12 month PE       21.08    21.08    20.77    20.33
Fwd Earnings Yield        4.74%    4.74%    4.81%    4.92%
90 day tbill yield        0.55     0.53     0.70     0.79
10 year tbond yield       2.48%    2.38%    2.72%    2.83%
Arezi Ratio               0.12     0.12     0.16     0.17
Fed Ratio                 0.52     0.50     0.57     0.58

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 111%
stocks, -11% cash this week.

Other timing indicators:
The S&P index is below its 200DMA. - Bearish
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 91%.

An alternative allocation, using S=120-30*Arezi Ratio and the first
two of the other timing indicators, produces a target of 105%.

Elan

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