Market surges on Federal Reserve wave

With the Dow Industrial Average hitting an all-time high, most observers attribute the surge to Federal Reserve action, forcing interest rates to near-zero levels and buying up assets. Weaning the markets off the drug will require an economic methadone clinic, experts say.

At Time, Martha White paints stocks "floating on an ocean of liquidity, courtesy of the Federal Reserve." She notes that Fed bond purchases have driven bond yields down to absurdly low levels. Since bonds are the usual recourse for risk averse investors and, she notes, real estate still carries a stench of 2008, investors are driven into equity markets, artificially raising their performance.

The link between Fed action and market performance is so tight, wrote Jeff Cox at CNBC, that some investors have begun to fear actual economic improvement, for fears that the Fed will turn off the tap.

"Indeed, investors have relied on the Fed to respond to bearish economic data with three phases of asset purchases, or quantitative easing," Cox wrote. "So good economic news sometimes is looked on unfavorably by a market that both has come to rely on its central bank backstop and fears that any upturn in the data will deter the Fed from more easing."

Skepticism is widespread, and often snarky. "Sure, it can't be bad news," wrote Paul Whitefield at the LA Times, "the fact that the Dow Jones industrial average is back to levels not seen since 2008, just before the housing bubble burst. (See "fool's gold" in the dictionary.)"

Summing up the jaded view on the Street, power hedge fund manager Stanley Druckenmiller told CNBC's Jim Cramer, "Sure, this is going to end badly, but in the meantime, we can make some money."

Which may be true for hedge fund managers, but less so for those riding out 401Ks.

Eric Schulzke writes on national politics for the Deseret News. He can be contacted at eschulzke@desnews.com.