I think that, regardless of the direction of the nonfinancial economy, "worried about deflation" and "promising to keep rates low" translates into "create more money" as fast as you can. The stock markets going up (not just U.S., but also Nikkei and peripherial submerging markets - but Russia might bear keeping an eye on again, what with Putin's moves against the oil-igarchs) is in anticipation of the great blasts of liquidity to be created in "the fight against deflation". Liquidity is all the SMs (and even broader asset markets, like R.E., which also gets a huge gov't subsidy to disconnect it from productive economy, anyway) are really fundamentally related to, not the productive economy. They don't "need" to believe in the direction of the productive economy, really. They are just following the bubble money machine, as before. They've been trained like Pavlovs' dog in the greatest financial bubble in history, after all. Nothing new here.
So it is interesting that the US S.Ms kept rising despite the recent contraction in U.S. money supply. This is probably conjunctural, a product of the need to "manage" the inevitable decline of the USD in the face of the Feds' no-holds-barred attempt at reflation (of the bubble!). That of course, is the other side of the Scylla and Charybdis the Fed / Treasury is trying to navigate.
Bottom line is: look for stagflation (of magnitude still unknown, but with definite potential to exceed the 1970's) rather than real deflation, in the dollar-denominated world. -- /**********************************************************************/ Brad Mayer ****************/