Plain English

Finance has a lot of words that sound like gatekeeping because they are. Here is every term this site uses, explained once, properly, without leaning on other jargon to do it.

You'll see these underlined the first time they appear in an article. Nothing here assumes you already know something else on this page.

The economy

CPI: The main official measure of inflation — a monthly check on a basket of everyday prices.; The Consumer Price Index: a government statistic that tracks the cost of a representative basket of goods and services. It is the number most people mean when they say 'inflation', and its monthly release regularly moves markets.
GDP: The total value of everything an economy produces — the standard measure of its size.; Gross Domestic Product: the total value of goods and services an economy produces in a period. Growth in GDP is the usual shorthand for 'the economy is expanding'; two consecutive quarters of shrinkage is the rough-and-ready definition of a recession.
inflation: The rate at which prices rise — how much less your money buys than it did a year ago.; How fast prices are rising across the economy, usually quoted as a percentage change from a year earlier. Two percent is what most central banks aim for. It matters to you directly through the shops, and indirectly because central banks raise interest rates to fight it.
recession: A sustained contraction in the economy, usually with rising unemployment.; A meaningful, sustained decline in economic activity. The casual definition is two consecutive quarters of shrinking GDP, though official bodies use broader judgement including employment and income. What it means in practice is fewer jobs and weaker pay growth.
soft landing: Cooling inflation without tipping the economy into recession.; The outcome a central bank hopes for when raising rates: inflation comes down, but growth and employment survive. The alternative — a hard landing — is a recession. Historically it is rare, which is why the phrase gets so much airtime.
tariff: A tax on imported goods, usually paid by the company importing them and often passed on to you.; A tax a government charges on goods coming in from abroad. The importing company pays it at the border, and typically tries to recover it by raising prices. That is why tariffs show up in inflation figures months later.

Interest rates & bonds

basis point: One hundredth of a percentage point.; A hundredth of a percentage point, so 50 basis points is half a percent. Finance uses it because 'rates rose 0.5%' is ambiguous — it could mean half a point, or half of the existing rate. Basis points remove the doubt.
bond: A loan you can buy and sell — you lend money and get interest until it is repaid.; An IOU issued by a government or company: you lend a sum, receive interest, and get your money back on a set date. Treasuries are US government bonds, generally treated as the safest thing to hold, which is why their yields anchor everything else.
central bank: The public institution that sets a country's interest rates and guards its currency.; A country's monetary authority. It sets short-term interest rates, aims to keep inflation stable, and acts as a lender of last resort in a crisis. The Fed, the European Central Bank and the Bank of England are the three that most affect global markets.
investment grade: A bond from a borrower rating agencies consider reliable.; The label for bonds from borrowers judged relatively safe by credit rating agencies. Many institutional investors, like pension funds, are only permitted to buy these — which is why the boundary between investment grade and junk matters so much.
junk bond: A bond from a riskier borrower, paying more interest to compensate.; A bond from a borrower rating agencies consider more likely to default. It pays a higher interest rate as compensation. When investors who normally buy safe bonds start reaching for these, it usually says something about how hungry they are for returns.
the Federal Reserve: America's central bank — it sets the interest rate everything else is priced off.; The United States' central bank. Its main lever is a short-term interest rate that ripples outward into mortgages, credit cards, savings accounts and business loans. The FOMC is the committee inside it that votes on that rate, roughly eight times a year.
yield: What a lender earns on a bond — and, for government bonds, the floor under most other borrowing rates.; The annual return you get for lending money by buying a bond. Government bond yields matter to everyone, not just investors: they set the baseline that mortgage rates, business loans and savings rates are built on top of. When they rise, borrowing generally gets more expensive across the board.

Markets & investing

hedge fund: A lightly-regulated investment fund for institutions and wealthy individuals.; A private fund that pools money from institutions and rich individuals and faces fewer restrictions than a public fund. It can borrow, bet on prices falling, and concentrate holdings. Fees are high and access is limited.
index fund: A fund that simply owns everything in a market index, rather than picking stocks.; A fund that buys every company in a given index — the S&P 500, say — in proportion to size, instead of trying to pick winners. Fees are low because there is little to decide. Most 401k money ends up in something like this.
liquidity: How easily something can be sold without moving its price.; How readily an asset can be turned into cash at a fair price. Shares in a huge company are liquid; a small property or a thinly-traded stock is not. Liquidity tends to vanish exactly when people most want it.
P/E ratio: Roughly how expensive a stock is relative to the profit it makes.; The share price divided by profit per share. A high number means investors are paying a lot for each dollar of current profit — usually because they expect profits to grow. It is a rough comparison tool, not a verdict.
S&P 500: An index of 500 large US companies — the usual shorthand for 'the US stock market'.; An index tracking 500 of the largest US listed companies, weighted by size. When the news says 'the market' rose or fell, this is usually what it means. Because it is size-weighted, a handful of the very largest companies move it disproportionately.
short selling: Betting a price will fall by selling borrowed shares and hoping to buy them back cheaper.; Borrowing shares, selling them, and aiming to buy them back later at a lower price to return them. The profit is the difference. Losses are theoretically unlimited, because a price can keep rising — which is why forced buy-backs can send a stock sharply higher.
volatility: How sharply and how often a price swings around.; A measure of how much a price moves, in both directions. High volatility means large swings, which is uncomfortable but not the same as losing money. It matters most if you might need to sell at short notice.

Companies

buyback: A company buying its own shares, which concentrates ownership among the remainder.; A company spending cash to buy its own shares off the market. With fewer shares outstanding, each remaining one represents a larger slice of the company. Supporters call it returning cash to shareholders; critics call it a way to flatter per-share figures.
capital spending: Money a company spends on long-lived assets like factories, equipment or data centres.; Spending on physical assets that last years, as opposed to day-to-day running costs. It signals what management expects: heavy capital spending means they are betting on future demand, and it eats cash in the meantime.
dividend: Cash a company pays out to shareholders from its profits.; A share of profits paid directly to shareholders, usually quarterly. Mature, stable companies tend to pay them; fast-growing ones usually reinvest instead. A cut is often read as a distress signal.
earnings: A company's profits — reported publicly every three months.; A company's profit, disclosed quarterly in a report that also covers revenue and management's outlook. Share prices often move more on the outlook than the profit itself, because markets price expectations rather than history.
IPO: The first time a private company sells shares to the public.; An Initial Public Offering: the point at which a private company lists its shares on a stock exchange and anyone can buy them. It raises money for the company and lets early investors cash out.
market cap: What the stock market thinks an entire company is worth.; Share price multiplied by the number of shares — the market's price tag for the whole company. It is the usual way to say how big a listed company is, though it reflects sentiment as much as substance.
the SEC: The US regulator that polices financial markets and company disclosures.; The Securities and Exchange Commission: the US agency that requires listed companies to disclose accurate information and pursues fraud and market abuse. Its filings are primary sources — the company's own words, on the record.

Crypto

stablecoin: A crypto token designed to hold a fixed value, usually one dollar.; A cryptocurrency intended to stay pinned to a conventional currency, typically the US dollar, by holding reserves against it. It functions as the cash leg of crypto trading. The recurring question is whether the reserves are really there.

A term explained badly is worse than a term left out. If one of these definitions is wrong or still confusing, that's our failure — tell us.