Not only have the yields fallen but the yield curve has flattened, generally regarded as a warning of slower growth ahead.

The bond market’s direction fits better with last week’s US Federal Reserve Board’s abrupt change of monetary policy guidance than the stock markets’.

Last week the Fed, having previously conditioned markets for more rate rises and the continuing winding down of its balance sheet (withdrawing liquidity from bond and mortgage markets and the financial system and putting some upward pressure on rates) revealed a significant change in its expectations.

It’s now "patiently’’ waiting for greater clarity on issues like the trade conflict with China, Brexit, the recent shutdown of the US government and the state of financial markets. There are no more rate rises on its near term horizon and it disclosed it is prepared to slow, or reverse, the normalisation of a balance sheet that was swollen by its bond and mortgage purchases over the decade post-crisis.

The question of which of bond or equity markets have the more accurate view of the future is an important one, and not just for the US and not just for financial markets.

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The Fed’s concerns about the future were related largely to what is happening outside the US domestic economy, where growth in China has slowed significantly, the European economies have weakened and the trade conflict between China and the US is affecting them both directly but also having spill-over effects in Asia and elsewhere.

The slowing growth in the world’s second-largest economy as China grapples, not just with the trade war Donald Trump initiated, but with the pre-existing imbalances within its financial system, is a material negative for global growth within a global economy that is highly integrated.

If the US economy, the world’s largest, were also to slow the prospect of a global recession and - given the levels of debt at every layer within the global financial system - global financial stress would become quite threatening.

In this economy, with the housing market on the verge of a meltdown thanks to the actions of prudential regulators and the banks’ responses to the royal commission, the condition of China and the world economy more broadly threatens nearly three decades of recession-free growth even before the federal government decides how and when to implement recommendations of the royal commission. How it responds to the commission could have even more profound impacts on a banking system that is central to economic stability and growth.

Equity markets responded very positively to the Fed’s statements last week, at least partly because they seemed to demonstrate the sensitivity of the Fed to financial market turbulence and its willingness to effectively bail investors out by loosening monetary policy.

With growth in US corporate profits (they grew more than 20 per cent last year with the help of the Trump tax cuts and increased governments spending) now expected to slow to mid-single-digit levels because of the global slowdown and the blow-back for US companies of the Trump trade policies, it’s not clear whether the equity market investors are pricing in economic fundamentals.

The bond market appears to see a slowdown in US growth, relying on signals like the expected lower corporate profits, decelerating house sales and manufacturing activity and brittle consumer and business confidence.

Stock market investors are discounting those factors, or perhaps just ignoring them.

There has patently been a sense in equity markets that the dramatic sell-off last year was overdone and created a buying opportunity.

The Fed’s change of stance, the end of the shutdown and a conviction that, whether or not the Trump administration coerces China into the concessions its more hawkish members are demanding, there will be a resolution of the trade dispute, appear to be driving the renewed sense of equity investor optimism.

If that optimism is justified, of course, then the Fed’s concerns would be allayed and it could resume the combination of rate rises and balance sheet normalisation that it has placed on hold for the moment.

That would unnerve equity investors and destabilise equity markets. In the long run, one way or another, the bond markets generally get it right.