Lingo topic · 121 terms
Fundamental analysis
Trading the reasons behind the price: economies, news and money flows.
A
B
- Bail-InRescuing a failing bank by making its own investors and large creditors take losses, instead of using taxpayer money.
- BailoutWhen a government, central bank or group of lenders pumps money into a failing company, bank or country to keep it alive.
- Balance of PaymentsA country's full record of money flowing in and out over a period: trade, income, investment and loans.
- Balance of TradeThe value of a country's exports minus its imports. Positive is a trade surplus; negative is a trade deficit.
- Balance Sheet RecessionA slump where companies and households focus on paying down debt after a bubble bursts, so cheap money fails to get them borrowing again.
- Bank LevyA special tax charged on banks, often on the size of their balance sheets, to make them pay for the risk they pose.
- BiflationWhen some prices are rising (inflation) while others are falling (deflation) in the same economy at the same time.
- Big Mac IndexThe Economist's light-hearted comparison of burger prices around the world, used to judge whether currencies look cheap or expensive.
- BlackRock Geopolitical Risk IndicatorA gauge from asset manager BlackRock that tracks how much markets and media are focused on geopolitical risks.
- Bond VigilantesBond investors who punish governments they see as reckless by selling their bonds and driving borrowing costs up.
- Bretton Woods AgreementThe 1944 deal that tied major currencies to the US dollar, and the dollar to gold, until it fell apart in the early 1970s.
- BRICSA group of large emerging economies: originally Brazil, Russia, India and China, later South Africa and more.
C
- Capital AccountThe part of the balance of payments that records investment and borrowing flows across a country's borders.
- CatalystAn event or piece of news that sparks a big move in price.
- CompletenessAn auditing principle: checking that every transaction that should be in a company's records actually made it in.
- Copper/Gold RatioThe price of copper divided by the price of gold, used as a rough gauge of growth optimism versus fear.
- Council of the European UnionThe EU body where ministers from each member country meet to pass laws and coordinate policy.
- Country RiskThe risk that problems in a particular country, from politics to debt to sudden capital controls, hurt investments tied to it.
- Credit RatingA grade, such as AAA or BB, showing how likely a government or company is to repay its debts.
- Current AccountThe part of the balance of payments covering trade in goods and services, plus income and transfers with the rest of the world.
D
- De-DollarizationEfforts by countries to rely less on the US dollar for trade, reserves and borrowing.
- Debt CeilingA legal cap on how much debt the US government can have outstanding, which Congress must raise or suspend to keep borrowing.
- Debt-to-GDP RatioA country's government debt divided by the size of its economy, a common gauge of how heavy its debt load is.
- DeficitWhen spending is larger than income. For governments, the gap between what they spend and what they collect in taxes in a year.
- DeflationA sustained fall in the general level of prices across an economy.
- DepressionA severe, long-lasting economic downturn, much deeper and longer than a normal recession.
E
- Economic and Monetary UnionThe EU framework that coordinates economic policy and created the euro, with a single currency and central bank for members who join.
- EconomistSomeone who studies how economies work: production, prices, jobs, money and trade.
- Emerging MarketAn economy that is growing and industrialising but is not yet considered fully developed, such as Brazil, India or South Africa.
- EurogroupThe informal meeting of finance ministers from the countries that use the euro.
- European CommissionThe EU's executive arm: it proposes laws, enforces EU rules and manages the budget.
- European Economic AreaThe single-market zone covering EU countries plus Iceland, Liechtenstein and Norway.
- European Financial Stability FacilityA temporary rescue fund set up in 2010 to lend to eurozone countries in debt trouble, later succeeded by the ESM.
- European Free Trade AssociationA trade bloc of four European countries outside the EU: Iceland, Liechtenstein, Norway and Switzerland.
- European ParliamentThe EU's directly elected parliament, which shares the job of passing EU laws and the budget.
- European Stability MechanismThe eurozone's permanent rescue fund, which lends to member countries in financial trouble, with conditions attached.
- European UnionA political and economic union of 27 European countries with a single market and shared laws.
- EurozoneThe group of EU countries that use the euro as their currency.
- ExportsGoods and services a country sells to the rest of the world.
F
- Financial ContagionWhen a financial crisis in one place spreads to other markets or countries, like a virus.
- Financial Instability HypothesisEconomist Hyman Minsky's idea that long periods of stability encourage ever-riskier borrowing until the system breaks.
- Fiscal DominanceWhen a government's debt is so large that the central bank feels pressured to keep rates low to keep it affordable, even if inflation is high.
- Fiscal PolicyHow a government uses taxes and spending to influence the economy.
- Fourth TurningA theory from authors William Strauss and Neil Howe that history moves in roughly 80–100-year cycles, ending in a period of crisis.
- Fundamental analysisJudging where a price might go by studying the economy, interest rates, news and politics behind it.
- FundamentalsThe underlying economic facts that drive a market: interest rates, growth, inflation, trade, politics.
G
- G10A group of industrial countries that cooperate on finance; in trading, 'G10 currencies' means the ten most traded developed-world currencies.
- G15A group of developing countries formed in 1989 to cooperate on trade and development; its membership has since grown beyond fifteen.
- G20A forum of 19 major economies plus the European Union and the African Union, covering most of the world's output.
- G5An early club of five big economies (US, Japan, Germany, France, UK), best known for the 1985 Plaza Accord.
- G7A forum of seven major advanced economies: the US, Japan, Germany, the UK, France, Italy and Canada.
- G77A coalition of developing countries at the United Nations, founded with 77 members in 1964 and now well over 130.
- G8The G7 plus Russia, a format that ran from 1997 until Russia was suspended in 2014.
- Global MacroeconomicsThe study of the big-picture economy across countries, and a trading style that bets on those large trends.
- GlobalizationThe growing connection of the world's economies through trade, investment, technology and the movement of people.
- GrexitShort for 'Greek exit': the possibility, feared during the debt crisis, that Greece would leave the euro.
H
I
- Immaculate DisinflationInflation falling back without a recession or big jump in unemployment, a best-case outcome central banks hope for.
- ImportsGoods and services a country buys from the rest of the world.
- InflationThe rate at which prices across an economy are rising, which means each unit of money buys a little less.
- Interest Rate DifferentialThe gap between the interest rates of two currencies, a major driver of exchange rates and of swap costs.
- Interest Rate ParityThe principle that the difference between two countries' interest rates should equal the gap between the forward and spot exchange rates.
- International Monetary FundAn international organisation that watches the global economy and lends to countries in financial trouble, with conditions attached.
L
M
- Ministry of FinanceA government's treasury department; in forex, the name usually means Japan's MOF, which decides when to defend the yen.
- Modern Monetary TheoryAn economic school arguing that a government printing its own currency can't run out of money, only into inflation.
- Moral hazardWhen someone takes bigger risks because they know someone else will absorb the damage if it goes wrong.
N
- NAAIM Exposure IndexA weekly survey showing how heavily active US money managers are invested in stocks.
- Net International Investment PositionA country's foreign assets minus what it owes to foreigners: its net worth against the rest of the world.
- New Development BankA development bank set up by the BRICS countries to fund infrastructure, seen as an alternative to the World Bank.
- Non-Tariff BarriersWays countries block or slow imports without using a tax: quotas, red tape, strict standards and the like.
O
- Olaf ScholzGerman politician who served as finance minister and then chancellor of Germany from 2021 to 2025.
- OPECA cartel of major oil-exporting countries that coordinates production to influence the price of crude.
- OPEC+OPEC plus a group of other big oil producers led by Russia, who coordinate how much crude they pump.
P
- Petrodollar RecyclingOil exporters taking the dollars they earn from selling crude and investing them back into the world economy.
- PetrodollarsUS dollars earned by oil-exporting countries, since crude is mostly priced and paid for in dollars.
- PIIGSA blunt acronym for Portugal, Italy, Ireland, Greece and Spain, the eurozone countries hit hardest by the debt crisis.
- Political RiskThe chance that elections, policy changes, unrest or conflict will hit a market or an investment.
- ProtectionismGovernment policies that shield home industries from foreign competition, using tariffs, quotas and other barriers.
- Purchasing Power ParityThe theory that exchange rates should drift toward the level where the same basket of goods costs the same everywhere.
Q
R
- RecessionA significant, broad-based decline in economic activity that lasts more than a few months.
- Reciprocal TariffsTariffs set to match, or "mirror", the tariffs and trade barriers another country imposes.
- ReferendumA public vote on a single question, which can shake currencies badly when the result is uncertain.
- Regional Comprehensive Economic PartnershipA free-trade agreement between China, Japan, South Korea, Australia, New Zealand and the ten ASEAN countries.
- Reserve CurrencyA currency that central banks and governments around the world hold in large amounts as part of their savings.
- Retaliatory TariffsTariffs a country imposes in response to tariffs placed on its own goods.
- Risk AppetiteHow willing investors are, at a given moment, to take chances in search of higher returns.
- Risk AversionA mood where investors shun risky assets and rush for safety, even at the cost of lower returns.
- Risk OffA market mood where fear dominates and money flows out of risky assets into safe havens.
- Risk OnA market mood where optimism dominates and money flows into riskier, higher-returning assets.
- Risk SentimentThe market's overall mood, swinging between greedy risk-taking and fearful safety-seeking.
S
- Safe Haven CurrenciesCurrencies investors flock to in times of fear, mainly the US dollar, Japanese yen and Swiss franc.
- Schengen AreaA group of European countries that have scrapped passport checks at their shared borders.
- Sectoral TariffsTariffs aimed at one industry, such as steel, cars or semiconductors, rather than at everything a country imports.
- SentimentThe overall mood of traders toward a market: optimistic, pessimistic or somewhere in between.
- Sentiment AnalysisStudying how traders feel and how they are positioned, to judge where the market might go next.
- Shadow BankingLending and credit activities carried out by institutions that aren't regulated as banks, such as funds and finance companies.
- Silent DepressionA popular claim that young people today face affordability problems as bad as the 1930s, even without mass unemployment.
- Soft LandingWhen a central bank cools inflation with rate hikes without tipping the economy into recession.
- Sovereign DebtMoney a national government owes, usually in the form of bonds sold to investors.
- Sovereign Wealth FundA state-owned investment fund that invests a country's surplus money, often from oil or exports, around the world.
- Squawk BoxA live audio news feed where announcers read out market-moving headlines and rumours as they happen.
- StagflationThe nasty combination of high inflation, weak growth and rising unemployment at the same time.
- Structural-Demographic TheoryA theory that societies become unstable when living standards fall for ordinary people and too many elites compete for too few top positions.
- SurplusHaving more coming in than going out, as with a government budget or a country's trade.
T
- TariffA tax a government charges on imported goods.
- Tariff TantrumA burst of market turmoil triggered by sudden, sweeping tariff announcements.
- Trade BalanceThe value of a country's exports minus its imports.
- Trade BarriersAny government rule or tax that makes it harder or more expensive to trade across borders.
- Trade WarAn escalating fight between countries using tariffs and other trade barriers against each other.
- Triffin DilemmaThe conflict a reserve-currency country faces: the world needs its currency, so it must run deficits, which slowly undermines trust in that currency.
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