Derivatives – Financial contracts where the value is based on performance of an underlying asset.
Exchange-traded funds (ETFs) – Funds that can be bought and sold (i.e. traded) on exchanges.
Gearing – The extent to which a company uses debt relative to equity in its capital structure. The greater the reliance on debt, the greater the gearing. Gearing can contribute to increased return on equity but also increases the financial risk to the business.
Hard/soft landing – A ‘hard’ landing refers to a period of economic slowdown caused by central bank tightening that triggers a recession. In a ‘soft landing' despite tightening, recession is either mild or avoided.
Headwinds/ tailwinds – Headwinds are factors likely to negatively affect a company, tailwinds on the other hand are likely to have a positive impact.
Maturity of a bond/ gilt – The date at which a
debt instrument ends, at which point the borrower
must pay back the principal value of the debt in full
to the bondholder.
Price / earnings ratio – A ratio derived by dividing a company’s share price by its earnings per share. It is a relative valuation measure to determine if a company’s share price could be over or undervalued relative to its earnings.
The Purchasing Managers' Index – A survey-based measure of sentiment around current and future business conditions in the service and manufacturing sectors. A number greater than 50 indicates sequential improvement in conditions whilst below 50 signals sequential deterioration in conditions.
‘Sticky’ inflation – Persistently elevated levels of inflation within an economy, typically associated with core measures (inflation excluding food and energy) where prices do not adjust as quickly to supply and demand changes.
