Four years and a few trillion dollars later, and the jury is in, so to speak, on the efficacy of what has been called "the greatest experiment" in the history of monetary policy.
Quantitative easing doesn't work.
At least not towards achieving either of the central bank's two core objectives; full employment and price stability. Sure it boosts asset prices, particularly in the stock market, and you bet it helps keep interest rates artificially low, but when it comes to completing that circle, and encouraging companies to hire, it's a hard argument to make.
"Monetary policy, we think, has kind of proven that it does not add jobs," says Brian Belski, chief investment strategist at BMO Capital Markets, in the attached video. "It's really fiscal policy and fundamentals that add jobs," he says, noting that even Ben Bernanke has repeatedly made that clear.
Of course, Belski's statement comes at a time when the Fed itself has been trying to extract itself from its $85 billion monthly binge in the bond market. As a result, Belski says the Fed has "backed itself into a corner," at least as far as unemployment is concerned, and probably won't get around to tapering until "well into 2o14." To be fair, the official unemployment rate has fallen sharply since peaking above 10% in 2009.
Adding to his belief that the Fed will follow an extra dovish route is the fact that at least two Fed governors in the past week have begun talking down the current policy unemployment target of 6.5% as too high, and perhaps not being as reflective of an improving economy as once thought.
"We have now reared an entire generation of investors that all they really know is to buy stocks because of monetary policy," Belski observes, noting that his own price target for the S&P 500 went up to 1,900 the moment the Fed took tapering off the table in September.
And this is only reining-in the asset purchases, a move that is widely seen as far easier than when the day comes that the Fed actually raises interest rates.
"We think the bond market, as it usually does, will actually react way before the Fed will be able to," Belski says of the ultimate move higher in borrowing costs. "But it's not like interest rates are off to the races anytime soon."
As a result, he takes exception with the notion that "the risk-on trade" is tantamount to higher equity prices.
"If you think about it, the risk-on trade is (now) bonds," he says "because of how this whole unwinding process is going to occur with the Fed."
Ultimately, investors have to make their own bet as to when the Fed will believe that the economy is capable of standing on its own two feet. In the meantime, Belski says he's waiting for another catalyst to kick-in and takes stocks higher.
"We think the next phase of the bull market will really be defined by fiscal policy (in Congress)," he says "and businesses coming back to America."
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