Arezi Ratio for Oct 31

*                         10/10    10/17    10/24    10/31/22
S&P 500 Index             3639.66  3583.07  3752.75  3901.06
Trailing 12 month PE      19.13    18.85    19.71    20.65
Trail Earnings yield      5.23%    5.31%    5.07%    4.84%
Forward 12 month PE       17.76    17.46    17.81    18.89   
Fwd Earnings Yield        5.63%    5.73%    5.61%    5.29%
90 day tbill yield        3.45     3.81     4.09     4.18
10 year tbond yield       3.89%    4.00%    4.21%    4.02%
Arezi Ratio               0.66     0.72     0.81     0.86
Fed Ratio                 0.69     0.70     0.75     0.76

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 77%
stocks, 23% 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 inverted. - Bearish

A composite allocation may start with the Arezi formula and subtract 10%
for each bearish indicator. The current target allocation is 37%.

An alternative allocation, using S=120-30*Arezi Ratio and the first
two of the other timing indicators, produces a target of 74%.

Elan

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