Still, the continued downtrend in overall import prices is helping to keep inflation in check, which is good for consumers, fixed income investors and domestic firms who import crude and intermediate goods for use in manufacturing. On the other hand, deflation in import prices is a concern for the Fed, even more so than inflation. This is one reason to keep the spigots open. However, the quantitative easing program is doing little to foster price growth because most of the newly printed money is being held in bank accounts at the Fed rather than entering the broader economy as loans (see my post General Thoughts on the Economy).
For bond investors and cash holders, this muted import price growth and low inflation environment is good news as, despite very low returns, there is not much loss in purchasing power. For fixed income investors, the bigger worry is a possible pullback in Fed stimulus. When that happens, which it eventually will, interest rates will most likely rise, leading to losses for bond holders. If the economy remains weak at that point, rising interests could dampen the recovery, which will weigh on stocks as well.