No. of Recommendations: 12
* 1/21 1/28 2/4 2/11/19
S&P 500 Index 2670.71 2664.76 2706.53 2707.88
Trailing 12 month PE 19.10 19.04 19.40 19.39
Trail Earnings yield 5.24% 5.25% 5.15% 5.16%
Forward 12 month PE 17.34 17.27 17.39 17.37
Fwd Earnings Yield 5.77% 5.79% 5.75% 5.76%
90 day tbill yield 2.41 2.39 2.40 2.43
10 year tbond yield 2.79% 2.76% 2.70% 2.63%
Arezi Ratio 0.46 0.45 0.47 0.47
Fed Ratio 0.48 0.48 0.47 0.46
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 96%
stocks, 4% cash this week.
Other timing indicators:
The S&P index is below its 200DMA. - Bearish
We are in the Nov-Apr part of the year. - Bullish
The trailing PE ratio of the S&P is above 17. - Bearish
The treasury yield curve is normal (not inverted). - Bullish
A composite allocation may start with the Arezi formula and subtract 10%
for each bearish indicator. The current target allocation is 76%.
An alternative allocation, using S=120-30*Arezi Ratio and the first
two of the other timing indicators, produces a target of 96%.
Elan