The Federal Reserve significantly expanded its presence in the financial markets by doubling the pace of its mortgage-backed securities and Treasuries from last year, resulting into record-breaking rallies in stocks and below-investment-grade bonds.

Investors will inevitably face a fork in the road. At some point they know the Fed and other central banks will pull back from their unprecedented levels of support. Rates will rise and inflict losses on bondholders. Stocks could take at least a short-term hit.