Arezi Ratio for Dec 26

*                         12/5     12/12    12/19    12/26/22
S&P 500 Index             4071.70  3934.38  3852.36  3844.82
Trailing 12 month PE      22.19    21.54    21.15    21.18
Trail Earnings yield      4.51%    4.64%    4.73%    4.72%
Forward 12 month PE       19.98    19.27    18.99    18.96   
Fwd Earnings Yield        5.01%    5.19%    5.27%    5.27%
90 day tbill yield        4.34     4.31     4.31     4.34
10 year tbond yield       3.51%    3.57%    3.48%    3.75%
Arezi Ratio               0.96     0.93     0.91     0.92
Fed Ratio                 0.70     0.69     0.66     0.71

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 74%
stocks, 26% 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 inverted. - Bearish

A composite allocation may start with the Arezi formula and subtract 10%
for each bearish indicator. The current target allocation is 44%.

An alternative allocation, using S=120-30*Arezi Ratio and the first
two of the other timing indicators, produces a target of 82%.

Elan

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