Arezi Ratio for Oct 24

*                         10/3     10/10    10/17    10/24/22
S&P 500 Index             3585.62  3639.66  3583.07  3752.75
Trailing 12 month PE      18.78    19.13    18.85    19.71
Trail Earnings yield      5.32%    5.23%    5.31%    5.07%
Forward 12 month PE       17.37    17.76    17.46    17.81   
Fwd Earnings Yield        5.76%    5.63%    5.73%    5.61%
90 day tbill yield        3.33     3.45     3.81     4.09
10 year tbond yield       3.83%    3.89%    4.00%    4.21%
Arezi Ratio               0.62     0.66     0.72     0.81
Fed Ratio                 0.67     0.69     0.70     0.75

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 80%
stocks, 20% 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 50%.

An alternative allocation, using S=120-30*Arezi Ratio and the first
two of the other timing indicators, produces a target of 76%.

Elan

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