Finance & economics, explained

Plain-English answers to the jargon in the headlines. Each one starts with a one-sentence answer.

• APRAPR (annual percentage rate) is the yearly cost of borrowing, including interest and certain fees, expressed as a percentage.
• APYAPY (annual percentage yield) is the yearly return you earn on savings, including the effect of compound interest.
• Bear marketA bear market is a decline of 20% or more in a stock index from its recent high.
• Bond yieldA bond's yield is the annual return an investor gets from it, expressed as a percentage of its price.
• Bull marketA bull market is a long period of rising stock prices, commonly defined as a 20% rise from a recent low.
• Compound interestCompound interest is interest earned on both your original money and the interest it has already earned.
• Core inflationCore inflation is the inflation rate with food and energy prices left out, to show the underlying trend.
• CPI (Consumer Price Index)The Consumer Price Index (CPI) measures the average change in prices that urban consumers pay for a basket of everyday goods and services.
• CryptocurrencyA cryptocurrency is a digital asset that runs on a blockchain, a shared public ledger, rather than being issued by a central bank.
• DeflationDeflation is a sustained fall in the general level of prices, the opposite of inflation.
• DisinflationDisinflation is a slowdown in the rate of inflation: prices are still rising, just more slowly than before.
• DividendA dividend is a payment a company makes to its shareholders, usually in cash and usually every quarter, out of its profits.
• Dividend yieldDividend yield is a stock's yearly dividends per share divided by its share price, shown as a percentage.
• Dot plotThe dot plot is a Federal Reserve chart showing where each FOMC participant expects the fed funds rate to be at the end of the next few years.
• Dow Jones Industrial AverageThe Dow Jones Industrial Average is a stock index of 30 large US companies, weighted by share price rather than company size.
• EarningsEarnings are a company's profit, and 'earnings' also refers to the quarterly reports in which public companies disclose their results.
• Earnings seasonEarnings season is the period of several weeks after each quarter ends when most public companies report their results.
• EPS (earnings per share)EPS (earnings per share) is a company's profit divided by its number of shares outstanding.
• ETF (exchange-traded fund)An ETF (exchange-traded fund) is a fund that holds a basket of investments, such as stocks or bonds, and trades on an exchange like a single stock.
• Expense ratioAn expense ratio is the yearly fee a fund charges, expressed as a percentage of the money you have invested in it.
• Fed funds rateThe federal funds rate is the interest rate banks charge each other for overnight loans, and the Federal Reserve sets a target range for it to steer the economy.
• Federal Reserve (the Fed)The Federal Reserve is the central bank of the United States, responsible for setting interest-rate policy and overseeing the banking system.
• FOMCThe FOMC (Federal Open Market Committee) is the group within the Federal Reserve that votes on US interest-rate policy.
• GDP (Gross Domestic Product)GDP (gross domestic product) is the total value of all goods and services produced in a country over a period of time.
• GuidanceGuidance is a company's own forecast of its future results, such as expected revenue or earnings for the next quarter or year.
• Index fundAn index fund is a mutual fund or ETF that aims to match the performance of a market index, such as the S&P 500, rather than trying to beat it.
• InflationInflation is the rate at which prices for goods and services rise over time, which means each dollar buys a little less.
• Interest ratesAn interest rate is the price of borrowing money, expressed as a yearly percentage of the amount borrowed.
• Inverted yield curveAn inverted yield curve is when short-term government bonds pay higher yields than long-term ones.
• Jobs reportThe jobs report (officially the Employment Situation) is the monthly Bureau of Labor Statistics release showing how many jobs the US economy added and the unemployment rate.
• Market capMarket capitalization (market cap) is the total value of a company's shares: the share price multiplied by the number of shares outstanding.
• Market correctionA market correction is a drop of at least 10%, but less than 20%, from a recent high.
• Mutual fundA mutual fund pools money from many investors to buy a portfolio of stocks, bonds or other assets, managed by a professional firm.
• NasdaqNasdaq is a US stock exchange, and 'the Nasdaq' in market news usually means the Nasdaq Composite index of stocks listed there, which is heavy in technology companies.
• Nonfarm payrollsNonfarm payrolls is the number of paid US workers excluding farm workers, private household employees and a few other groups; the monthly change is the headline jobs number.
• P/E ratioThe P/E (price-to-earnings) ratio is a company's share price divided by its earnings per share, showing how much investors pay for each dollar of profit.
• PCE price indexThe PCE price index measures the prices of goods and services bought by US households and is the Federal Reserve's preferred inflation gauge.
• PPI (Producer Price Index)The Producer Price Index (PPI) measures the change in prices that US producers receive for their goods and services.
• Prime rateThe prime rate is the interest rate that big US banks use as a base for many consumer and business loans, and it typically sits 3 percentage points above the top of the Fed funds target range.
• Quantitative easing (QE)Quantitative easing is when a central bank buys large amounts of bonds to push down long-term interest rates and support the economy.
• Real vs. nominalA nominal figure is measured in today's dollars, while a real figure is adjusted for inflation to show true changes in value or quantity.
• RecessionA recession is a significant, broad-based decline in economic activity that lasts more than a few months.
• S&P 500The S&P 500 is a stock market index that tracks about 500 of the largest US public companies, weighted by market value.
• StagflationStagflation is an economy with high inflation, weak growth and rising unemployment all at the same time.
• StockA stock (or share) is a small piece of ownership in a company.
• TariffsA tariff is a tax a government charges on imported goods, paid by the importing business when goods cross the border.
• Treasury bondsTreasury securities are loans to the US government; investors buy them and receive interest plus their money back at maturity.
• Unemployment rateThe unemployment rate is the share of people in the labor force who don't have a job but are actively looking for one.
• VolatilityVolatility is how much and how quickly prices move up and down.
• Yield curveThe yield curve is a line showing the interest rates (yields) on government bonds from short to long maturities.