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Earnings Aside, Fed Is Still Main Market Player

Federal Reserve Bank Chairman Ben Bernanke.
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The seemingly foregone conclusion that the stock market rise has been all about the Federal Reserve suddenly seems a little less foregone.

Two Wall Street analyses over the past few days contend that earnings growth and not the Fed's money-printing has driven the market's meteoric surge from the March 2009 lows to today's bull run.

After all, the studies say, companies on the have seen earnings growth of 129 percent since the March 2009 trough. The index measuring stock market performance since then has been nearly identical—up 128 percent.

Easy conclusion then, that the true driver of stock market growth has been earnings, right?

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"I'm not saying Fed policy hasn't mattered," Dan Greenhaus, chief global strategist at BTIG, said in an interview. "My point is when people (say) stocks are going up because the Fed is printing all of this money, that's too simplistic of an argument."

Greenhaus' assertion that it's not all about the Fed, however simplistic in its own right, has gained a few disciples.

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Art Cashin, the head of floor operations at UBS whose words carry significant weight on Wall Street, called a note from Greenhaus last week on the topic "simple. Neat. Even elegant."

Then over the weekend, Tobias Levkovich, chief U.S. equity strategist at Citigroup, weighed in with a similar analysis.

"There is almost an obsessive belief system built around central bank policy in that when the Fed is easing, share prices climb, and when it is tightening, stock prices fall," he said in a note. "However, the Fed is not easing 70 percent—75 percent of the time which is the rough estimate of the times when stock prices rise."

Hence, there seems to be a substantive disconnect between reality and perception," Levkovich added.

Indeed, the tie between earnings and stock market performance is compelling.

But the tie between the Fed's quantitative easing timeline and the rise and fall in stocks is even more so.

QE, which has involved about $2.2 trillion in bond buying since its in launch in 2008, has tracked stock performance closely not just in aggregate dollar amounts but also in the rise and fall of the market.

(Read More: Who's Afraid of QE Ending? Not the Bond Market)

QE1 launched in November 2008 as the market reeled from the collapse of Bear Stearns and, more signficantly, Lehman Brothers. The first round spurred a quick one-month gain in the market that eventually reversed—until the Fed accelerated the money printing in March 2009.

That move triggered a violent rally that peaked in April 2010—a month after QE 1 ceased.

The market then swooned through the summer until Fed Chairman Ben Bernanke's speech at Jackson Hole, Wyo., in August that most in the market took as a signal that the Fed was ready to launch a second QE round.

A rally followed that peaked in July 2011—again, a month after QE2 ended.

The Fed followed in September with Operation Twist, a program that involved an equal amount of bond buying and selling aimed at driving down long-term borrowing rates.

Though the market initially dipped after Twist it eventually bounced back, rallied until April 2012 then swooned into September, when the Fed announced open-ended QE, which some call QE Infinity or QEternal, a move that has taken the total Fed balance sheet past the $3 trillion mark.

While volatile, the market has been broadly higher since.

Moreover, research at Bespoke Investment Group has shown that at least 30 percent of the market's gains have come solely on days of Fed policy announcements, let alone what has happened during the actual asset purchases themselves.

Levkovich insists, though, that the Fed is not the whole story.

"There is a deeply mistaken view that the only thing that has happened since late 2008 has been the Fed's aggressive easy money policy as if capex has not recovered and that the consumer is nowhere to be found even as consumption is at record levels, exceeding the 2007 highs," he said.

"Markets have not been discounting earnings growth as is often assumed; the index has been moving in tandem with earnings for nearly 20 years now as skepticism is the new normal versus the prior mindset of optimism," he added.

More importantly, though, is what all this means to Fed policy.

(Read More: Is the Fed Being Forced to Take More Risks?)

Both Greenhaus and Levkovich assert that the market-earnings correlation shows that the market will not collapse should the Fed stop QE and begin normalizing interest rates from their current near-zero levels. Greenhaus notes, in fact, that the market historically has risen when the Fed increases rates.

"It would be counterintuitive for the Fed to hike rates and cause a recession," he said. "It just doesn't work that way."

Levkovich was even more pointed, saying that the correlation points to a potential exit for the Fed.

"Indeed, for the many investors opposed to entitlement spending, we would suggest that Fed entitlement should fall under the same umbrella of disdain," he said.

Yet the market just two weeks ago quivered at the mere mention that some Fed officials were worrying about the underlying costs of QE, suggesting that at least from a psychological standpoint, the Fed is still clearly part of the game.

-By Jeff Cox, senior writer. Follow him on Twitter at @JeffCoxCNBCcom.