Demand and Supply are Intertwined...

 Like recession, periods of high growth are also self-reinforcing due to EXPECTATIONS. This time inflation expectations, in the US were that it would subside soon, therefore people did not cut spending. The memory of the last decade's lower than 2% inflation reinforced those expectations.

If we know the expectations we could avert a negative outcome or even reinforce a positive outcome by the way of some economic stimuli.

This time people believed that inflation would come back soon so they did not cut spending and it did not cut the supply by lowering employment which kept reinforcing lower price expectations.

Prices are the oldest most reliable indicator of recessions and low prices could soon turn into a full-fledged recession, and the Fed thinks that may help avert a recession by cutting the interest rates.

Nonetheless, price expectations could help manage demand, supply growth, and expectations. It is a dichotomy that high price expectations are managed by high interest and lower price expectations by lower interest rates due to stress on the demand side and could reinforce expectations.

However, from a supply-side perspective, high price expectations must be dealt with by lowering interest rates and lowering price expectations by increasing interest rates, which could diminish expectations by affecting the productivity of capital, demand, supply, and growth.

The work of central banks is to reinforce positive expectations and diminish negative expectations though it is a time consistency problem since at times it wants high inflation and sometimes low inflation because prices are variable.

Nevertheless, it is a long debate whether we are managing demand or supply, but both are intertwined. During low growth, demand, supply, and price expectations we cut interest rates and during high growth, demand, supply, and price expectations we hike which could be self-fulfilling and could be avoided by maintaining stability in the interest rates.

Stocks’ Nash Equilibrium

Speculators bet on market behavior in order to gain from an investment though everybody is speculating on one thing or the other and largely all are investing time and money on something in expectation of something, nonetheless, it is largely not pointed that speculators’ behavior makes the market behavior that their aggregate actions decide where the markets would move which depend upon their expectations ie aggregate expectations and that is how the subconscious of the market works or the underlying subconscious of the investors. The aggregate expectations decide the market behavior and actions and outcomes based on the available information. On a micro level, a person increases spending and investment if he sees that prices are going to go up in the near future and vice versa and we could easily generalize it on a macro level that people increase spending or investment when they expect prices to go up which actually increases the price and the other way, too. That is, aggregate expectations and actions are self-fulfilling. 

Inflation and interest rate changes are self-reinforcing, higher inflation means people would demand more and supply would go down and prices would go up again and a higher interest rate means lower employment and demand and supply, too, which further increases prices. Demand and supply are not two, the person who supplies, demands, too. Our ability to supply depends upon how much we demand, what we demand is what we supply, and if demand goes down supply goes down, too. Demand could not be met without supply. Maintaining stability proactively fosters the central bank's credibility and for stability; a top and bottom of inflation and interest rates are assigned to manage demand and supply. At the bottom, everybody would increase demand and at the top everybody could supply which would help stabilize demand and supply and prices and interest rates. Prices and interest rates would move around the Mean or Average of the demand price and the supply prices. It would help reduce uncertainty about prices and demand and supply. Everybody would demand and supply at the same price or interest rates and maximize returns. Excess demand and supply determine future prices. Prices and interest rate expectations could increase volatility, but the central bank's job is to curb this volatility. 

Stock Market is a place where the purpose of bids and offer is to maximize gains from trading shares and require a strategy to satisfy all which is commonly missing, since in the stock market everybody misses the lowest buy price and highest sell price in the short run which leads to missing the long-run highest price targets. Most people regret to buy at higher price and sell at lower prices in the short-run. Both, the people who are buying and selling and even the companies want higher prices for their shares, there is no opponent, everybody is a trader which requires strategy to benefit all by increasing price of a stock. Everybody needs a strategy to excel in the stock market so that prices reach high prices range in the short-run.

If everybody follows profit maximisation behaviour, returns for everybody would increase... Means that people shall set buy limit order lowest of the price range and set sell limit order highest of the price range... If everybody does the same profits would be maximised...

Everybody wants to invest in the stock markets, but very few know that if they follow the profit maximisation behaviour they might be able to get the maximum returns… Yes, if everybody set same buy limit price (lowest) and set same sell limit price (highest) according to price range, profits could be maximised and everybody would gain…

If everybody follows profit maximisation markets could stabilise because when prices are significantly low investors could buy which could increase prices and when they are significantly high investors could sell which could lower prices...

If everybody sets a same limit price for buy and sell, everybody would gain... bid price should be the low price range and the offer price should be the high price... It is like giving some bargaining power to the investors if investors bid and offer at same prices... It would help predict stock prices right…

The strategy of a stock market has not originally taken from the Nash Equilibrium but has semblance with the theory and the strategy discussed here satisfy all Nash Equilibrium conditions that a participant has no incentive to move away from the optimal market strategy for two players, in the stock market the buyers and the sellers.