"Give me a fruitful error anytime, full of seeds, bursting with its own corrections." - Vilfredo Pareto

NEW YORK ( TheStreet) -- The Federal Reserve announced last week that it would maintain its pace of buying $85 billion worth of assets per month. Market participants rejoiced as expectations for any tapering of "quantitative easing" continued to be pushed further into 2014.

The prevailing wisdom, of course, is this is highly bullish for U.S. stocks, as seen by the behavior of the S&P 500 ETF ( SPY - Get Report), and that equities will steadily march higher as long as QE is present. In effect, when it comes to the U.S. stock market, apparently money grows on "QEes."

Looking at a chart of the S&P 500 this year, it is easy to see why faith in QE is currently at an all-time high. We have had one of the smoothest advances on record and all minor dips have been aggressively bought. With QE a constant during this advance, it is only natural to assume it was the primary cause and its continuation will lead to further gains. Correlation must equal causation.

Courtesy of StockCharts.com

The only problem with this assumption is that we happen to have a real-world example of a country that is engaging in even more QE than the U.S., that being Japan. Japan's asset purchase program is roughly double the Fed's as a % of GDP (15% vs. 7%) and actually includes purchases of equities such as exchange-traded funds and real estate investment trusts in addition to bonds. Given this backdrop and the assumed high correlation between QE and stocks, one would expect Japan's stocks, as seen in the Wisdom Tree Japan Hedged Equity ETF ( DXJ), to be surging higher here with the S&P.

However, that is simply not the case. While the Nikkei began the year in a similar vertical fashion to the S&P, it started to diverge at its May peak. Since that point, despite no interruption in the Bank of Japan's QE efforts, it has been unable to hit new highs. To the contrary, it actually has been stalling at successively lower highs since its May peak.

Courtesy of StockCharts.com

While I don't expect the Japan example to dissuade the QE true believers, it should be food for thought for the rest of us. At the very least we should not assume that QE means uninterrupted new highs as far as the eye can see. We also should not assume that big corrections can not happen, as the May breakdown in Japan's stock market proves.

The smooth trajectory for the S&P 500 in 2013 is the exception, not the norm. While many are attributing this smooth path to QE, it is never that simple. QE was present in 2010-2012 and we still saw multiple corrections of greater than 10% in those years. Correlation does not always equal caution, and this is especially true in short time periods.

Traders and investors expecting a path similar to 2013 in 2014 are likely to be disappointed, regardless of what the Fed does. Our ATAC models used for managing our mutual fund and separate accounts continue to favor bonds over stocks in the near term.

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This article was written by an independent contributor, separate from TheStreet's regular news coverage.