When, amid the plunging stock market in October as we neared the end of QE3, Jim Bullard said QE4 was possible; not only did markets then undertake the longest and most consistent streak of gains in history, he appears to have entirely changed the market's reaction function to data...
Just as Yellen was set to pull the market's liquidity feed, Bullard's comments implicitly imprinted a new narrative. For months in the lead up to the end of QE3, markets and macro data were tightly coupled as investors saw economic strength as supportive of the recovery meme. However, as the realization - following the end of the government's fiscal year in September - that the economy was not reaching escape velocity, that global geopolitical risks no longer had a harness, and that the oil price drop was perhaps not unequivocally good; investors started to pull back.
Then Bullard's comments changed all that. Having been conditioned to 'know' that money-printing means rising stocks (over the past few years), his comments provided support for the view that if things get worse economically, then The Fed will be back with moar money-printing and stocks will rise.
In other words, the fact that equity valuations and fundamentals are entirely decoupled is not irrational exuberance, it's a rational conditioned reflex to a Fed that will never - ever - as Alan Greenspan noted - be able to remove itself from the equation.
"Bad News is Good News" - Thank you Mr. Bullard.