What If This Is As Good As It Gets For The Stock Market?

Trader Mark submits:

The Fed is likely to lag the markets, as they do in most cycles. The markets will probably anticipate the Fed reversing QE. The Fed will surprise few investors. The Fed should reverse QE in a yield curve-neutral way, in our view. Steepening the curve risks perversely stimulating the economy by making carry trades and loan spreads more profitable. This cycle will probably end as do most cycles. The Fed will be behind the curve, play catch-up, tighten too much, invert the curve, and cause a recession.

Tim Duy: Don't Dismiss the Communications Value of QE, by Tim Duy: The minutes of the last FOMC meeting indicated that one group of policymakers was getting anxious about the size and pace of QE:

With the stock market setting new 5-year highs, I was interested to take another look at some of the long-term fundamentals underlying equity values. On the one hand, I'm expecting the real economy to be doing better in the second half of the year than it is right now, and inflation and interest rates to remain low through the end of the year. All of that should be bullish for stocks.

By Eric Parnell:Corporate profit margins are running at all time highs. While this may sound like a good thing at first, it’s yet another headwind for the stock market going forward. Corporations in the United States have done an exceptional job in streamlining their businesses in recent years. And the aftermath of the 2008 financial crisis over the last several years has provided a particularly ideal environment for companies to advance this objective.

John D. Frankola submits:The stock market finished 2010 strongly, with the S&P 500 Index producing total returns of 6.7% for the month of December and 10.8% for the fourth quarter. The S&P 500 rose on 17 of 22 trading days in December, making it the best December since 1991. The strong finish helped to turn 2010 into a very good year for equity investors.