Much has been made over the last several months of the fact that quantitative easing from the U.S. Federal Reserve may no longer be working to artificially lift asset prices. Such conclusions were premature, however, as the Fed's latest stimulus program had not truly gotten underway in earnest despite being first announced in mid-September. That is, of course, until the start of the New Year when U.S. Treasury purchases were added to the mix. This already appears to be changing how the stock market is responding on a day-to-day basis in a positive way. This does not necessarily mean, however, that stocks are set to continuously rise forever and to infinity.
The liquidity flowing into the market from QE3 had been sluggish and sporadic for the first several months of the program. This was due to the fact that QE3 only focused on the purchase of mortgage-backed securities (MBS) at a rate of $40 billion per month. Although the Fed was actively