Alpha: Can be discussed as both risk-adjusted excess return relative to a specific benchmark, or absolute excess return relative to a benchmark. It is sometimes more generally referred to as excess returns in general.
Artificial intelligence (AI): A field that combines computer science and robust datasets to enable problem-solving.
Balance sheet: Refers to the cash and cash equivalents part of the current assets on a firm’s balance sheet and cash available for purchasing new positions.
Basis point (bp): 1/100th of 1 percent.
Bearish: Characterized by or associated with falling share prices.
Beta: A measure of the volatility of a security or a portfolio in comparison to a benchmark. In general, a beta less than 1 indicates that the investment is less volatile than the benchmark, while a beta more than 1 indicates that the investment is more volatile than the benchmark.
Brexit: An abbreviation of “British exit” that mirrors the term Grexit. It refers to Britain’s withdrawal from membership in the European Union.
Bureau of Labor Statistics (BLS): A unit of the United States Department of Labor that measures labor market activity, working conditions, price changes and productivity in the U.S. economy to support public and private decision-making.
Buyback: When a company uses its own cash to purchase its own outstanding shares; may positively impact the share price.
Buyback yield: The amount of a company’s buybacks divided by its market capitalization.
Commodity: A raw material or primary agricultural product that can be bought and sold. Core inflation: Inflation excluding the impact of food and energy.
Corporate bond: A debt security issued by a corporation. Disinflation: Term used to describe instances of slowing inflation, different from deflation in that price levels are still increasing overall, just at a slower rate.
Dividend yield: A financial ratio that shows how much a company pays out in dividends each year relative to its share price.
Downside: Currency depreciation.
Duration: A measure of a bond’s sensitivity to changes in interest rates. The weighted average accounts for the various durations of the bonds purchased as well as the proportion of the total government bond portfolio that they make up.
Earnings growth: The annual compound annual growth rate of earnings from investments.
Emerging market: Characterized by greater market access and less potential for operational risks when compared to frontier markets, which leads to a larger base of potentially eligible investors.
Estimated P/E ratio: Share price divided by estimated 12-month earnings per share. Lower numbers indicate an ability to access greater amounts of estimated 12-month earnings per dollar invested.
Federal Funds (Fed Funds): Excess reserves that commercial banks and other financial institutions deposit at regional Federal Reserve banks.
Federal Open Market Committee (FOMC): The branch of the Federal Reserve Board that determines the direction of monetary policy.
Federal Reserve (Fed): The Federal Reserve System is the central banking system of the United States.
Futures market: An auction market in which participants buy and sell commodity and futures contracts for delivery on a specified future date.
Gross domestic product (GDP): The sum total of all goods and services produced across an economy.
Growth: Style of investing emphasizing stocks with share prices typically higher in relation to financial metrics, such as dividends or earnings.
Hawkish: Description used when worries about inflation are the primary concerns in setting monetary policy decisions.
High yield (HY): Sometimes referred to as “junk bonds,” these securities have a higher risk of default than investment-grade securities.
Inflation: Characterized by rising price levels.
Initial public offering (IPO): The first sale of stock by a private company to the public.
International Monetary Fund (IMF): The International Monetary Fund is an international financial institution headquartered in Washington, D.C., consisting of 190 countries.
Investment grade (IG): A rating that signifies a municipal or corporate bond presents a relatively low risk of default.
Market capitalization: Market cap = share prices x number of shares outstanding. Firms with the highest values receive the highest weights in approaches designed to weight firms by market cap.
Master limited partnership (MLP): Investment structure where holdings typically must derive most of their cash flows from real estate, natural resources or commodities, combining the tax benefits of a partnership—taxes occur when holders receive distributions—with the liquidity of a publicly traded company.
Monetary policy: Actions of a central bank or other regulatory committee that determine the size and rate of growth of the money supply, which in turn affects interest rates.
New York Fed’s General Business Survey: The monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York.
Personal Consumption Expenditure (PCE) Price Index: A measure of the prices that people living in the United States, or those buying on their behalf, pay for goods and services. The core PCE Price Index measures the prices paid by consumers for goods and services without the volatility caused by movements in food and energy prices to reveal underlying inflation trends.
Price-to-earnings (P/E ratio): The ratio for valuing a company that measures its current share price relative to its per-share earnings (EPS).
Price-to-sales (P/S) ratio: Share price divided by per-share revenue.
Quality: Characterized by higher efficiency and profitability. Typical measures include earnings, return on equity, return on assets and operating profitability. This term is also related to the quality factor, which associates these stock characteristics with excess returns versus the market over time.
Recession: Two consecutive quarters of negative GDP growth, generally characterized by a slowing economy and higher unemployment.
Relative value: The relationship between a particular attribute, e.g., a dividend, and the firm’s share price compared to that of another firm.
Securitized: A debt security whose value is backed by an asset or pool of assets such as a mortgage.
Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS): A survey the Federal Reserve conducts to gain insight into bank lending practices and conditions.
Size capitalization: A measure by which a company’s size is classified. Large caps are usually classified as companies that have a market cap of more than $10 billion. Mid-caps range from $2 billion to $10 billion. Small caps are typically new or relatively young companies and have a market cap between $200 million and $2 billion.
Spread: Typically refers to a difference between a measure of yield for one asset class and a measure of yield for either a different subset of that asset class or a different asset class entirely.
Treasury (UST): Debt obligation issued by the U.S. government with payments of principal and interest backed by the full faith and credit of the U.S. government.
Treasury bill: A t-bill is a short-term debt obligation backed by the U.S. government with a maturity of one month (four weeks), three months (13 weeks) or six months (26 weeks).
U-3 unemployment level: The official unemployment rate. It measures the number of people who are jobless but actively seeking employment.
U-6 partial employment level: The percentage of workers who are involuntarily working at less than full employment.
Valuations: Refers to metrics that relate financial statistics for equities to their price levels to determine if certain attributes, such as earnings or dividends, are cheap or expensive.
Value: Style of investing characterized by lower price levels relative to fundamentals, such as earnings or dividends. Prices are lower because investors are less certain of the performance of these fundamentals in the future. This term is also related to the value factor, which associates these stock characteristics with excess returns versus the market over time.
Yield: The income return on an investment. Refers to the interest or dividends received from a security that is typically expressed annually as a percentage of the market or face value.
Yield curve: Graphical depiction of interest rates on government bonds, with the current yield on the vertical axis and the years to maturity on the horizontal axis.
Yield to worst: The rate of return generated assuming a bond is redeemed by the issuer on the least desirable date for the investor.
Bloomberg U.S. Aggregate Corporate Index: A broad base, market capitalization-weighted bond market index representing investment grade corporate bonds traded in the United States.
Bloomberg U.S. Corporate High Yield Index: Measures the USD-denominated, high yield, fixed-rate corporate bond market.
Case-Shiller Home Prices Indexes: The Standard & Poor’s CoreLogic Case–Shiller Home Price Indexes are repeat-sales house price indexes for the United States. There are multiple Case–Shiller Home Price Indexes: A national home price index, a 20-city composite index, a 10-city composite index and 20 individual metro area indexes.
Conference Board Consumer Confidence Index: The monthly Consumer Confidence Survey®, based on a probability-design random sample, is conducted for The Conference Board by Nielsen, a leading global provider of information and analytics around what consumers buy and watch. The Conference Board is a global, independent business membership and research association working in the public interest.
Consumer Price Index (CPI): A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care.
Dow Jones FXCM Dollar Index: The value of the United States dollar relative to a basket of four currencies: the euro, the British pound, the Japanese yen and the Australian dollar.
FTSE Emerging Markets Index: A free float-adjusted market capitalization index that is designed to measure the equity market performance of emerging markets.
ICE US Dollar Index (DXY): A leading benchmark for the international value of the U.S. dollar.
MSCI ACWI Index: A free float-adjusted market capitalization-weighted index that is designed to measure the equity market performance of developed and emerging markets.
MSCI EAFE Index: A market cap-weighted index composed of companies representative of the developed market structure of developed countries in Europe, Australasia and Japan.
MSCI Emerging Markets Index: A broad market cap-weighted index showing the performance of equities across 24 emerging market countries defined as “emerging markets” by MSCI.
NFIB Small Business Optimism Index: The NFIB Research Foundation has collected Small Business Economic Trends Data with quarterly surveys since 1973 and monthly surveys since 1986. The sample is drawn from the membership files of the National Federation of Independent Business (NFIB).
Russell 3000: Measures the performance of the 3,000 largest U.S. companies based on total market capitalization.
S&P 100 Index: Refers to a subset of the S&P 500 Index that represents the leading stocks with exchange-listed options.
S&P 500 Index: A market capitalization-weighted benchmark of 500 stocks selected by the Standard and Poor’s Index Committee, designed to represent the performance of the leading industries in the United States economy.
S&P GSCI Index (Copper/Agriculture/Softs/Precious Metals/Non-Precious Metals/Energy): A leading measure of general commodity price movements and performance over time.
U.S. Corporate Master Option-Adjusted Spread: Uses an index of bonds that are considered investment grade (those rated BBB or better). When the last calendar day of the month takes place on the weekend, weekend observations will occur as a result of month-ending accrued interest adjustments.
U.S. High Yield Master II Option-Adjusted Spread: The calculated spreads between a computed OAS index of all bonds in a given rating category and a spot Treasury curve. An OAS index is constructed using each constituent bond’s OAS, weighted by market capitalization.
Wilshire Liquid Alternative: Measures the performance of a focused basket of mutual funds that provides risk-adjusted exposure to equity hedge, global macro, relative value and event-driven alternative investment strategies.
Zillow Rental Index: Measures changes in asking rents over time, controlling for changes in the quality of the available rental stock.
Investors should carefully consider the investment objectives, risks, charges and expenses of the Funds before investing. To obtain a prospectus containing this and other important information, please call 866.909.9473, or visit WisdomTree.com/investments to view or download a prospectus. Investors should read the prospectus carefully before investing.
There are risks associated with investing, including the possible loss of principal. Foreign investing involves special risks, such as risk of loss from currency fluctuation or political or economic uncertainty. Investments in emerging or offshore markets are generally less liquid and less efficient than investments in developed markets and are subject to additional risks, such as risks of adverse governmental regulation and intervention or political developments. Funds focusing their investments on certain sectors and/or regions and/or smaller companies increase their vulnerability to any single economic or regulatory development. This may result in greater share price volatility.
Dividends are not guaranteed, and a company currently paying dividends may cease paying dividends at any time.
Fixed income investments are subject to interest rate risk; their value will normally decline as interest rates rise. High-yield or “junk” bonds have lower credit ratings and involve a greater risk to principal. Fixed income investments are also subject to credit risk, the risk that the issuer of a bond will fail to pay interest and principal in a timely manner or that negative perceptions of the issuer’s ability to make such payments will cause the price of that bond to decline. Diversification does not guarantee a profit or eliminate the risk of a loss.
You cannot invest directly in an index. Index performance does not represent actual fund or portfolio performance. A fund or portfolio may differ significantly from the securities included in the index. Index performance assumes reinvestment of dividends but does not reflect any management fees, transaction costs or other expenses that would be incurred by a portfolio or fund, or brokerage commissions on transactions in fund shares. Such fees, expenses and commissions could reduce returns.
This material contains the opinions of the authors, which are subject to change, and should not be considered or interpreted as a recommendation to participate in any particular trading strategy, or deemed to be an offer or sale of any investment product, and it should not be relied on as such. There is no guarantee that any strategies discussed will work under all market conditions. This material represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This material should not be relied upon as research or investment advice regarding any security in particular. The user of this information assumes the entire risk of any use made of the information provided herein.
Kevin Flanagan, Rick Harper, Jeremy Schwartz, Scott Welch and Jeff Weniger are registered representatives of Foreside Fund Services, LLC.
WisdomTree Funds are distributed by Foreside Fund Services, LLC, in the U.S.