Arezi Ratio for Jun 20


*                         5/30     6/6      6/13     6/20/22
S&P 500 Index             4158.24  4108.54  3900.86  3674.84
Trailing 12 month PE      20.85    20.62    19.55    18.39
Trail Earnings yield      4.80%    4.85%    5.12%    5.44%
Forward 12 month PE       18.94    18.70    17.78    16.68
Fwd Earnings Yield        5.28%    5.35%    5.63%    5.99%
90 day tbill yield        1.08     1.21     1.39     1.63
10 year tbond yield       2.74%    2.96%    3.15%    3.25%
Arezi Ratio               0.22     0.25     0.27     0.30
Fed Ratio                 0.52     0.55     0.56     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 105%
stocks, -5% 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 75%.

An alternative allocation, using S=120-30*Arezi Ratio and the first
two of the other timing indicators, produces a target of 91%.

Elan

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