Conventional wisdom has it that the Federal Reserve's massive easing program laid the foundation for the stock market's surge that has seen the S&P 500 index triple over the past six years.
Not so, says John Tamny, political economy editor at Forbes.
To give the Fed credit for the rally, "we’d have to believe that central bankers have suddenly figured out how to engineer bull markets," he writes.
The Fed has kept short-term interest rates at a record low since December 2008 and expanded its balance sheet to $4.5 trillion through quantitative easing.
"Not asked enough is why the Fed’s [stimulus] would excite investors in the first place," Tamny says. "Quantitative easing has logically been anti-market for it revealing unfortunate overreach whereby the Fed acts as capital allocator over information-pregnant markets themselves."
So what is responsible for stocks' ascent?
"The gridlock that’s prevailed in Washington since early 2012 seems a more likely driver of optimism for it somewhat removing government as a risk to future returns," Tamny maintains.
Meanwhile, though the biggest developed economies may be rebounding, multiple dangers remain, meaning central banks must maintain their monetary to stimulus, according to an editorial in The Economist.
"Gazing across the battered economies of the rich world it is time to declare that the fight against financial chaos and deflation is won," the editors write. In the United States, the economy grew 2.4 percent last year, and many analysts expect similar growth this year.
"However, the global economy still faces all manner of hazards, from the Greek debt saga to China’s shaky markets," the editorial notes. "Few economies have ever gone as long as a decade without tipping into recession." The U.S.' Great Recession ended in 2009.
"Sooner or later, policymakers will face another downturn," the editorial explains.
"The danger is that, having used up their arsenal, governments and central banks will not have the ammunition to fight the next recession. Paradoxically, reducing that risk requires a willingness to keep policy looser for longer today."
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