Firstly please excuse this very basic economic/investing question.
It is my understanding that aside from speculation (purely gambling on the future price of a product) the markets serve a more fundamental purpose particularly in the sense of giving investors a yield. For example money will flow across the FX market to make the most of attractive yields in interest rates hence carry trades Money will flow into bonds because of attractive yields and a safe haven for investors. In both these occasions price speculation itself isnt the key factor, if i know that i can get 5% extra interest on currency x then im not going to worry about where it is trading im just going to transfer my money (hope my assumptions are correct so far).
SO in summary price moves in bonds and currencies are very often reflected by yield gained for having your money in that financial vehicle.
However, what links a shares price to company performance? Who says share prices should go up as the economy grows? Yes i know the company will be doing better (all things being equal) and in theory the company's value deserves to be higher. But the world of finance isnt about who deserves what, i want to know what makes it in investors interests to invest in equities when very few of them pay a dividend, or yield?
If the answer is, they invest in equities because everyone assumes as the economy grows the shares go up that seems more of a self fullfilling prophecy than any economic reason?
Hope this makes sense, thanks you
I do not know of any fixed link. Price of anything may change at any time for reasons that are unknown to me.