Investors move from higher yields to lower yields or higher prices to lower prices markets in order to increase the value of investment because you buy cheap and sell high to increase revenue...
Low and stable inflation and expectations increase investment and demand and prices and expectations foreign capital inflows, too, and vice versa...
Lower prices increase the value of money and investment... Low prices or inflation signal that big money would pour in through investments... Lower price also mean higher competitive real wages and demand or consumption, exports are too likely to increase...
Lower prices make the economy more productive and competitive more money supply would increase demand, foreign trade and investment, too...
Lower prices mean that the economy has the capacity to expand further... but, too much higher prices and expectations could do the opposite and lower price expectations and delay demand and increase supply...
The rate cuts we are seeing in the US is the insurance against the trade-fights since unemployment rate is too low and stable, but demand and prices are low also due to tariffs which might get a boost if the Fed cuts interest rates...
The Fed is trying to increase inflation and expectations in the broader economy to increase spending, but tariffs are increasing uncertainty for earnings... Had there was no fight over trade practices the economy did not need rate cuts...
Since unemployment and prices are low and stable... Lower prices could increase demand, but lower price expectations due to lower borrowing cost may reinforce delay in demand and spending and supply could also increase...
Any intervention by the policymakers by the way of manipulating money supply and prices and expectations in the market could reinforce prices and expectations in the market...
For instance lower prices and expectations make policy makers increase money supply and prices and expectations, but higher money supply as long as there is unemployment in the economy, and lower borrowing cost would increase investment and lower unemployment and increase supply and further lower prices...
Nonetheless, in the face of no intervention prices may help recover fast to restore price stability and full employment.
Lower bond yields may mean that money has flown to safety and people are expecting slowdown... Or due to lower prices and interest rate cut and expectations which increase money supply to bonds and could further lower bond yields because there is slowdown in the broader market including the stock or inventory markets...
Lower bond yields also mean that prices or inflation and expectations are also low due to hold or delay in investment and over supply, but bond prices may increase profits... Higher price expectations from an increase in value due to low price and increase in demand boost spending and revenue and growth and vice versa...
Too much volatility in prices could deter or slow the process of recovery to the objective of price stability and full employment...
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