Glossary
What the numbers mean
Plain-language definitions of every index, asset, and indicator we track in the monthly report, with the latest reading where we have one.
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83 terms
Index 17
- Communication Services sectorXLCCompanies that connect people and sell their attention: social media, search, streaming, video games and phone service, such as Meta, Alphabet (Google) and Netflix.
- Consumer Discretionary sectorXLYCompanies selling things people want but can put off: cars, travel, restaurants, home improvement and online shopping, such as Amazon, Tesla and Home Depot.
- Consumer Staples sectorXLPCompanies selling everyday basics people buy in good times and bad, like groceries, drinks and household goods, such as Costco, Walmart and Procter & Gamble.
- Dow Jones Industrial AverageAn index of 30 large, well-known US companies. Unlike most indexes it is weighted by share price rather than company size.
- Energy sectorXLEOil and natural gas companies that find, pump, refine and transport fuel, such as Exxon Mobil, Chevron and ConocoPhillips.
- Financials sectorXLFBanks, insurers, payment networks and investment firms, such as Berkshire Hathaway, JPMorgan Chase and Visa.
- Healthcare sectorXLVDrug makers, medical device companies, health insurers and hospitals, such as Eli Lilly, Johnson & Johnson and UnitedHealth.
- Industrials sectorXLICompanies that build, move and defend: aerospace, machinery, railroads, airlines and construction, such as GE Aerospace, Caterpillar and Union Pacific.
- Materials sectorXLBProducers of the raw stuff other industries use: chemicals, industrial gases, paint, metals and mining, such as Linde, Sherwin-Williams and Newmont.
- Nasdaq 100NDXAn index of the 100 largest non-financial companies listed on the Nasdaq exchange. It leans hard toward technology, so it moves further than the S&P 500 in both directions.
- Nasdaq CompositeIXICHas chartAn index of every common stock listed on the Nasdaq exchange, around 3,000 of them, weighted by how much each is worth. It leans hard toward technology, so it runs further than the S&P 500 in both directions.
- Philadelphia Semiconductor IndexSOXHas chartAn index of about 30 companies that design chips, make them, or build the equipment that makes them. It is the cleanest public proxy for the chip cycle.
- Real Estate sectorXLRECompanies that own or run property, like warehouses, cell towers, data centers and apartments, such as Prologis, American Tower and Equinix. Most are real estate investment trusts (REITs).
- Russell 2000RUTAn index of about 2,000 smaller US companies. Smaller firms borrow at floating rates more often, so this index reacts quickly when interest rates move.
- S&P 500SPXHas chartAn index of 500 large US companies, weighted by how much each is worth. When someone says “the market” without naming anything, this is usually what they mean.
- Technology sectorXLKCompanies that make chips, computers, software and tech services, such as Nvidia, Apple and Microsoft. It is the largest sector in the S&P 500.
- Utilities sectorXLUCompanies that supply electricity, natural gas and water, such as NextEra Energy, Southern Company and Duke Energy. Many are regulated, which keeps their profits fairly steady.
Fund / ETF 4
- EEM (emerging markets)EEMThe iShares MSCI Emerging Markets ETF, which holds large and mid-sized companies in developing economies such as Taiwan, China, India, South Korea and Brazil.
- Equal-weight S&P 500RSPHas chartA fund holding the same 500 companies as the S&P 500, but giving each one the same weight, so the largest handful cannot set the result on their own.
- Magnificent SevenMAGSThe seven largest U.S. technology-driven companies: Apple, Microsoft, Nvidia, Alphabet, Amazon, Meta and Tesla. The Roundhill Magnificent Seven ETF (MAGS) holds them in equal weights.
- SPYSPYHas chartA fund that holds the S&P 500’s members in the index’s own proportions, so the biggest companies count the most. Buying one share is shorthand for owning the whole index.
Asset 6
- BondA loan you make to a government or company. It pays interest on a set schedule and returns the amount you lent when it matures. When interest rates rise, existing bonds lose value.
- Brent crudeThe international benchmark grade of crude oil, from the North Sea. It usually trades a few dollars above WTI, the US benchmark.
- GoldXAUA metal held as a store of value rather than for income. It pays nothing, so its price reflects what people will give up in interest to hold it.
- High-yield bondsBonds from companies rated below investment grade, BB+ or lower, also called junk bonds. They pay more interest because the borrower is more likely to default.
- TreasuriesBonds issued by the US government: bills (a year or less), notes (2 to 10 years) and bonds (20 to 30 years). They are treated as the safest dollar investment.
- WTI crudeCLHas chartWest Texas Intermediate, the US benchmark grade of crude oil, quoted in dollars per barrel. It sets the starting price for gasoline, diesel and jet fuel.
Indicator 24
- 10-year Treasury yieldThe yearly return on a ten-year US government bond bought today and held to the end. It is the reference rate behind mortgages and most long-term borrowing.
- 2-year Treasury yieldHas chartThe yearly return on a two-year US government bond. Because it comes due soon, it mostly reflects what investors expect the Federal Reserve to do next.
- 30-year Treasury yieldThe yearly return on a thirty-year US government bond, the longest maturity the Treasury issues.
- Buffett indicatorThe total market value of US nonfinancial company shares divided by the size of the economy (GDP). A rough, slow-moving gauge of how richly the stock market is valued.
- CCC credit spreadHas chartThe extra yield investors demand to hold bonds rated CCC and below, the riskiest tier of the junk-bond market, over comparable Treasuries (ICE BofA US CCC & Lower option-adjusted spread).
- Consumer price index (CPI)Has chartThe Bureau of Labor Statistics' measure of the prices urban households pay for a basket of goods and services. The headline figure includes food and energy; core CPI leaves them out.
- Core CPIHas chartThe consumer price index with food and energy taken out, because those two swing hardest month to month. Published by the Bureau of Labor Statistics.
- Core PCEHas chartA second inflation measure, also without food and energy, built from what households actually spend rather than a fixed basket. This is the one the Fed targets.
- Corporate credit spreadThe extra interest companies pay to borrow compared with the government. It widens when lenders get nervous.
- Dollar index (DXY)DXYAn index of the US dollar's value against a basket of six major currencies, more than half of it the euro.
- Fed funds rateThe overnight rate US banks charge each other, held inside a target range set by the Federal Reserve. Nearly every other borrowing rate is priced off it.
- Gross domestic product (GDP)The total value of the goods and services an economy produces. The US reports it each quarter, usually as a yearly growth rate after inflation.
- High-yield credit spreadHas chartThe extra yield lenders ask for holding bonds from riskier companies instead of US Treasuries, quoted in basis points (ICE BofA US High Yield option-adjusted spread). Wider means lenders want more to take the risk.
- Initial jobless claimsThe number of people filing for unemployment benefits for the first time each week. One of the quickest reads on layoffs.
- ISM manufacturing indexA monthly survey of purchasing managers at US factories. A reading above 50 means manufacturing is expanding; below 50, contracting.
- MOVE indexMOVEHas chartThe bond market’s version of the VIX: an estimate of how far US Treasury yields are expected to move, built from options on Treasuries.
- Nonfarm payrollsThe Labor Department's monthly count of jobs added or lost at US employers outside farming, published in the jobs report.
- P/E ratioA stock's price divided by its earnings per share: how many dollars investors pay for each dollar the company earns. A forward P/E uses expected earnings for the next year instead of the last one.
- Recession IndicatorSherman’s read on where the US economy is in the business cycle: Expansion, Slowing, Warning or Recession, built from public economic data and updated as it comes in.
- U-3 unemployment rateThe share of people who want a job and are looking but don’t have one. It’s the headline rate reported each month.
- VIXVIXHas chartAn index built from S&P 500 option prices that estimates how far the index is expected to swing over the next 30 days. Higher means traders are paying up for protection.
- VIXEQVIXEQHas chartThe Cboe S&P 500 Constituent Volatility Index: the average expected 30-day swing of the individual stocks in the S&P 500, read from their options prices.
- Yield curve (2s10s)Has chartThe ten-year Treasury yield minus the two-year. Positive means longer loans pay more, which is normal. Negative — inverted — means the short end pays more.
- Yield curve inversionWhen short-term government bonds pay more than long-term ones, so the yield curve slopes down instead of up.
Concept 32
- Asset allocationHow a portfolio is split among kinds of investments, such as stocks, bonds and cash. Rebalancing brings the mix back to its target after markets move it.
- BacktestingTesting an investing rule on historical data to see how it would have performed before putting money behind it.
- Basis pointOne hundredth of a percentage point (0.01%), often written bp. A move of 25 basis points is 0.25%.
- Bear marketA fall of roughly 20% or more from a recent peak, usually over several months.
- Bull marketA long stretch of rising prices across a market, often dated from a 20% rise off a low.
- Business cycle stagesThe economy’s long rise and fall: years of growth, a slowdown, sometimes a recession, then recovery.
- Cap-weighted indexAn index that weights each company by its total market value, so the biggest companies move it the most. The S&P 500 is cap-weighted; its equal-weight version gives every company the same share.
- CorrelationHow closely two investments move together, from +1 (always in step) to −1 (always opposite). Holdings with low correlation to each other give a portfolio real diversification.
- DiversificationSpreading money across different investments so that no single company, sector or event can do outsized damage to the whole portfolio.
- DrawdownThe fall in value from a peak to a later low, as a percentage. The bigger the drawdown, the bigger the gain needed to recover: a 50% loss takes a 100% gain to undo.
- EarningsA company’s profit after all its costs, interest and taxes. Earnings per share (EPS) divides that profit by the number of shares, so companies of different sizes can be compared.
- ETF (exchange-traded fund)A fund that holds a basket of investments, like stocks or bonds, and trades on an exchange like a single stock. One share gives you a slice of everything the fund owns.
- Federal ReserveThe US central bank. It sets the target for short-term interest rates and can buy or sell bonds to steer borrowing costs, aiming for steady prices and maximum employment.
- Index fundA mutual fund or ETF that holds the stocks or bonds in an index, like the S&P 500, instead of picking them. Costs are usually low because no one is choosing investments.
- InflationA general rise in prices over time that shrinks what each dollar buys. The Federal Reserve aims for about 2% a year.
- Interest ratesThe price of borrowing money, shown as a yearly percentage of the amount borrowed. Savers earn it and borrowers pay it; the Federal Reserve’s decisions push short-term rates up or down.
- Investment-grade bondsBonds from borrowers rated relatively safe, BBB- or higher. They are the opposite of high-yield, or junk, bonds.
- LeverageUsing borrowed money, or funds built to multiply an index’s daily move, to get more exposure than your own cash allows. It magnifies gains and losses alike.
- Margin debtMoney investors borrow from their broker, using their own stocks as collateral, to buy more.
- Market breadthHas chartHow many members of an index are taking part in a move, rather than a handful of large ones. We measure it as the share of S&P 500 companies trading above their own 200-day average price.
- Market capitalizationA company's share price times its number of shares outstanding: the total value the market puts on the company.
- Market correctionA fall of 10% to 20% from a recent high. A fall of 20% or more is a bear market.
- Market sectorOne of the 11 groups the stock market is split into by line of business, like technology, healthcare or energy. Every company in the S&P 500 belongs to exactly one.
- Moving averageThe average closing price over a set number of recent days, recalculated every day. It smooths out day-to-day noise to show the underlying trend.
- NBER Business Cycle Dating CommitteeThe committee at the National Bureau of Economic Research, a private research group, that officially dates the start and end of US recessions.
- Price momentumThe tendency of a price's recent trend to keep going, usually measured by its returns over the past several months. Positive momentum means it has been rising faster than its peers; negative momentum, falling faster.
- Private creditLoans made directly by non-bank funds, mostly to mid-sized private companies, instead of through banks or public bond markets. Funds sold to individuals often allow withdrawals of only about 5% of assets a quarter.
- Sector rotationMoney shifting from one group of sectors to another over time, so the sectors in the lead change. Leadership might pass from technology to energy, for example, or from the largest companies to the average stock.
- TrendlineA line drawn across a series of price highs or lows on a chart to show the direction prices have been moving. A clean break through it can signal the trend is changing.
- Uptrend and downtrendAn uptrend is a price that keeps making higher highs and higher lows over months; a downtrend is the reverse. A common test is whether the price is above or below its long-term moving average.
- ValuationHow expensive an investment is compared with what it earns or owns. Measures like the P/E ratio show whether a price is high or low relative to profits.
- VolatilityHow far and how fast a price swings over a period, whether up or down.