GLOSSARY

Artificial intelligence (AI): A field that combines computer science and robust datasets to enable problem-solving.

Basis point (bp): 1/100th of 1 percent.

Bond yield: Refers to the interest received from a bond and is usually expressed annually as a percentage based on its current market value.

Bullish: A position that benefits when asset prices rise.

Bureau of Labor Statistics (BLS): A federal agency that collects and disseminates various data about the U.S. economy and labor market.

Case-Shiller Home Price Indexes: A group of indexes that tracks changes in home prices throughout the United States. The indexes are based on a constant level of data on properties that have undergone at least two arm’s length transactions. Case-Shiller produces indexes representing certain metropolitan statistical areas as well as a national index.

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. The CPI is calculated by taking price changes for each item in the predetermined basket of goods and averaging them; the goods are weighted according to their importance. Changes in CPI are used to assess price changes associated with the cost of living. Core CPI excludes food and energy costs.

Core inflation: Inflation excluding the impact of food and energy.

Corporate bond: A debt security issued by a corporation.

Deflation: A downward movement of the general price level of goods and services.

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.

Dot Plot: A chart based on the economic projections of the Federal Reserve board members that illustrates their views on the appropriate pace of policy firming and provides a target range or target level for the federal funds rate.

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 multiple: Another way of saying price-to-earnings multiple.

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.

Fiscal Policy: Government spending policies that influence macroeconomic conditions. These policies affect tax rates, interest rates and government spending, in an effort to control the economy.

Fitch Ratings: An international credit rating agency. Investors use the company's ratings to determine which investments are less likely to default and yield a solid return.

Floating Rate Treasury Note: A debt instrument issued by the U.S. government whose coupon payments are linked to the 13-week Treasury bill auction rate.

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.

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.

Inverted yield curve: An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the same credit quality.

Investment grade (IG): A rating that signifies a municipal or corporate bond presents a relatively low risk of default.

Magnificent Seven: A term used by stock market investors to describe a set of seven large tech stocks. The stocks are Apple, Inc., Amazon.com, Inc., Alphabet, Inc., Meta Platforms, Inc., Microsoft Corp., NVIDIA Corp., Tesla, Inc.

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.

Mean reversion: The concept that a series of returns has a tendency to return to its average level over longer periods, even if shorter periods can exhibit wide swings.

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.

Price-to-earnings (P/E) ratio: Share price divided by earnings per share. Lower numbers indicate an ability to access greater amounts of earnings per dollar invested.

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.

Return on equity (ROE): Measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested.

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.

Securitized: A debt security whose value is backed by an asset or pool of assets such as a mortgage.

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.

TINA: An acronym for “there is no alternative.” It is often used by investors to justify a lackluster performance by stocks on the grounds that other asset classes offer even worse returns.

TIPS: Bonds issued by the U.S. government. TIPS provide protection against inflation. The principal of a TIPS increases with inflation and decreases with deflation, as measured by the Consumer Price Index. When a TIPS matures, you are paid the adjusted principal or original principal, whichever is greater.

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.

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 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: 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.

Zillow Rental Index: A repeat-rent index that is weighted to the rental housing stock to ensure representativeness across the entire market, not just those homes currently listed for-rent.