Far from rejoicing at three more months of full-strength U.S. Federal Reserve stimulus, investors are instead worrying about what the central bank's decision implies about the growth outlook.
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After teeing up markets for a cut in its $85 billion a month of bond buying in response to improved economic data, inaction on this front at the central bank's September meeting left many investors questioning their assumptions about Fed policy.
Days before the fourth quarter begins, the three dominant investment plays of the third quarter - a preference for equities over bonds, developed markets over emerging, Europe over United States - look set for a second wind.
Global debt yields have followed those on U.S. Treasuries lower in the last week and the dollar has lost 1 percent against a basket of currencies, oil has dipped 2 percent and world stocks are flat.
This suggests market faith in the U.S. economic recovery, which had triggered expectations of a $5-15 billion cut in Fed stimulus, has taken a knock.
"The lack of movement on the part of the Fed, if anything, puts a question mark over their credibility, in my mind, and their data dependency is more likely to cause rather than reduce volatility in markets," Fredrik Nerbrand, global head of asset allocation at HSBC, said.
Nerbrand was wary about the U.S. economy before the Fed meeting and remained so. "We still sit on a relatively large position in sovereign debt, in particular U.S. Treasuries. We do see evidence of a more fragile economic situation."
The Fed's decision pushed the U.S. 10-year government bond yield to 2.65 percent from 3 percent. German 10-year yields are back near six-week lows, down 15 basis points from near 2 percent before the Fed decision on Sept. 18.
DATA, DATA, DATA
Given the Fed's reiteration of its focus on economic data, particularly jobs, the Oct. 4 non-farm payrolls report will be in particular focus, as will the start of the third-quarter earnings season.
For Richard McGuire, senior fixed income strategist at Rabobank, the Fed's decision meant the market now had an "asymmetric bias in terms of how it responds to the data".
"The default position has changed. The market default position is now (that) liquidity will remain abundant unless it's told otherwise," he added.
A poll just after the Fed meeting showed economists believed the Fed would cut stimulus by $15 billion a month in December, but some flagged the risk that it may not start to wind down its money-printing until early 2014.
While many investors expect sharper price moves around data releases, this has yet to spike across asset classes.
In the foreign exchange markets, euro/dollar 1-month volatilities are at their lowest since December 2012, while expectations of stock market swings have fallen on both sides of the Atlantic.
Euro STOXX 50 volatility is down 12 percent and the U.S. VIX down 2.5 percent, albeit off its post-Fed lows.
Fares Benouari, fund manager at Union Bancaire Privee, said he was still comfortable with his decision to increase equity bets in sectors more geared to economic growth, but that the outlook was less clear from a policy perspective.
As a result, he was looking to the earnings season - particularly in the United States - to justify his positive stance.
"The third-quarter earnings season should bring some of the expected improvement versus the first half but won't trigger EPS upgrades for the year. However, we start to hear cautious optimism from CEOs when it comes to the 2014 outlook," he said.
Hedge funds look to be betting the year's solid equity gains will continue. One investor in hedge funds said equity long/short hedge funds, who bet on shares rising and falling, had increased their net U.S. long positions by 2 percent post-Fed, with Europe up a little and emerging markets by over 10 percent.
However, Thomson Reuters StarMine data shows the gap between Europe and the United States remains marked - a further potential pitfall for those looking to improved fundamentals in the real economy as a reason to invest.
Euro STOXX 50 blue chips are expected to show a contraction in year-on-year earnings of 9.3 percent, while U.S. blue chips are set to show growth of 2.2 percent, according to the data.
Looking to 2014, StarMine shows there were 35 percent more analyst cuts to STOXX Europe 600 earnings estimates in the last 30 days than upward revisions, while the equivalent gap for the Standard & Poor's 500 was 12 percent.
With the market overwhelmingly of the view that European shares had further to rise on the back of economic growth, better earnings and supportive valuations, Joachim Fels, strategist at Morgan Stanley, flagged the scope for contrarians.
"If you happen to be a contrarian, you should probably sell stocks till your hands bleed, and then sell some more."