Arezi Ratio for Jul 11


*                         6/20     6/27     7/4      7/11/22
S&P 500 Index             3674.84  3911.74  3825.33  3899.38
Trailing 12 month PE      18.39    19.56    19.01    19.36
Trail Earnings yield      5.44%    5.11%    5.26%    5.17%
Forward 12 month PE       16.68    17.72    17.02    17.48
Fwd Earnings Yield        5.99%    5.64%    5.87%    5.72%
90 day tbill yield        1.63     1.73     1.73     1.98
10 year tbond yield       3.25%    3.13%    2.88%    3.09%
Arezi Ratio               0.30     0.34     0.33     0.38
Fed Ratio                 0.54     0.55     0.49     0.54

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 101%
stocks, -1% cash this week.

Other timing indicators:
The S&P index is below its 200DMA. - Bearish
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 71%.

An alternative allocation, using S=120-30*Arezi Ratio and the first
two of the other timing indicators, produces a target of 89%.

Elan

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