Arezi Ratio for Jul 4


*                         6/13     6/20     6/27     7/4/22
S&P 500 Index             3900.86  3674.84  3911.74  3825.33
Trailing 12 month PE      19.55    18.39    19.56    19.01
Trail Earnings yield      5.12%    5.44%    5.11%    5.26%
Forward 12 month PE       17.78    16.68    17.72    17.02
Fwd Earnings Yield        5.63%    5.99%    5.64%    5.87%
90 day tbill yield        1.39     1.63     1.73     1.73
10 year tbond yield       3.15%    3.25%    3.13%    2.88%
Arezi Ratio               0.27     0.30     0.34     0.33
Fed Ratio                 0.56     0.54     0.55     0.49

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 104%
stocks, -4% 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 74%.

An alternative allocation, using S=120-30*Arezi Ratio and the first
two of the other timing indicators, produces a target of 90%.

Elan

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