Glossary

The annual return a bondholder earns. It moves with the bond’s price.

Example: When bond prices fall, their yields rise.

Analysts’ average expectation for a figure. Markets react to how far the actual number differs from it.

Example: If inflation comes in at 3.4% against a 3.1% consensus, that is an upside surprise.

The best-known inflation measure: how the cost of a typical basket of goods and services has changed.

Example: The US CPI report comes out every month, and markets watch it closely.

Spreading money across different assets so that one falling does not wipe out the whole portfolio.

Example: A portfolio of stocks, bonds and gold is more diversified than a single stock.

A measure of the US dollar’s strength against a basket of major currencies.

Example: A rising DXY means the dollar is gaining against the euro, the yen and other currencies.

The European Central Bank. It sets interest rates for the euro area.

Example: ECB decisions move the euro against the dollar.

Exchange-traded fund: a basket of assets whose shares trade on an exchange like an ordinary stock.

Example: An S&P 500 ETF gives you 500 companies in a single purchase.

The Federal Reserve, the central bank of the United States. Its decisions move markets around the world.

Example: The Fed meets to decide on its rate eight times a year.

A rise in the overall price level, so the same money buys less.

Example: Inflation of 5% means a basket of goods costs about 5% more than a year ago.

The price of borrowing money. The central bank sets a base rate that loans and deposits follow.

Example: When the Fed raises its rate, dollar loans get more expensive.

How easily and quickly an asset can be bought or sold without moving its price much. Also: how much spare money there is in the system.

Example: When central banks “add liquidity”, more money flows into markets.

A group of oil-exporting countries and their partners that agree on how much oil to produce.

Example: An OPEC+ decision to cut output can push oil prices up.

The interest rate minus inflation. It shows what holding money really earns.

Example: A 4% rate with 3% inflation gives a real rate of about 1%.

Assets with high potential returns and large swings: stocks, cryptocurrencies.

Example: When investors feel confident, they buy risk assets more readily.

An index of 500 large US companies. The main benchmark for the US stock market.

Example: When people say “the market went up”, they often mean the S&P 500.

Assets people buy in uncertain times: gold, government bonds, the dollar.

Example: Demand for gold often rises during crises.

A program on a blockchain that carries out the terms of a deal automatically.

Example: On Ethereum, smart contracts run token swaps with no middleman.

How strongly and quickly an asset’s price moves.

Example: Bitcoin is more volatile than gold: its price swings more sharply.