The impact we had expected for the economy and for the markets was achieved. By February of 2009, the Fed had purchased over $1 trillion in securities. With interest rates throughout the yield curve moving in the direction of eventually resting at the lowest levels in 239 years of history, the stock market reacted: It bottomed in the first week of March of 2009 and then rose dramatically through 2014. The addition of a third round of QE, which had the Fed buying $85 billion per month of securities to ultimately expand its balance sheet to over $4.5 trillion, juiced the markets.
I voted against QE3 but the majority of the committee embraced it. One could argue — as I did — that QE3 and its predecessor rounds front-loaded the equity market. Stated differently, I believe we engineered a version of the "Wimpy philosophy": We gave stock-market investors two hamburgers today in exchange for one or none tomorrow. We pulled forward the price-reaction function of markets.
If that is a correct assessment, then there may well be a payback period of lesser movement in stock prices to follow. 2015 might have been the beginning of that balancing out: Minus dividends, the S&P and every other index experienced minor negative returns last year. (If you take out four stocks — Google, Amazon, Facebook and Netflix — the Nasdaq Composite finished down 0.3 percent for the year.) It would not be unreasonable to expect subdued returns this year given that stocks are still richly priced by historic standards.