The money market and the capital market are not single institutions but two broad components of the global financial system.The money market is the trade in short-term debt. It is a constant flow of cash between governments, corporations, banks, and financial institutions, borrowing and lending for a term as short as overnight and no longer than a year.The capital market encompasses the trade in both stocks and bonds. These are long-term assets bought by financial institutions, professional brokers, and individual investorsTogether, the money market and the capital market comprise a large portion of what is known as the financial marketThe Money MarketThe money market is a good place for individuals, banks, other companies, and governments to park cash for a short period of time, usually o

A cyclical stock is a stock that's price is affected by macroeconomic or systematic changes in the overall economy. Cyclical stocks are known for following the cycles of an economy through expansion, peak, recession, and recovery. Most cyclical stocks involve companies that sell consumer discretionary items that consumers buy more during a booming economy but spend less on during a recession.KEY TAKEAWAYSCyclical stocks are affected by macroeconomic changes, where its returns follow the cycles of an economy.Cyclical stocks are generally the opposite of defensive stocks. Cyclical stocks include discretionary companies, such as Starbucks or Nike, while defensive stocks are staples, such as Campbell Soup.Cyclical stocks usually have higher volatility and are expected to pr

Floating stock is the number of shares available for trading of a particular stock. Low float stocks are those with a low number of shares. Floating stock is calculated by subtracting closely-held shares and restricted stock from a firm’s total outstanding shares.Closely-held shares are those owned by insiders, major shareholders, and employees. Restricted stock refers to insider shares that cannot be traded because of a temporary restriction, such as the lock-up period after an initial public offering (IPO).A stock with a small float will generally be more volatile than a stock with a large float. This is because, with fewer shares available, it may be harder to find a buyer or seller. This results in larger spreads and often lower volume.KEY TAKEAWAYSFloatin

The secured overnight financing rate (SOFR) is a benchmark interest rate for dollar-denominated derivatives and loans that is replacing the London interbank offered rate (LIBOR). Interest rate swaps on more than $80 trillion in notional debt switched to the SOFR in October 2020. This transition is expected to increase long-term liquidity but also result in substantial short-term trading volatility in derivatives.KEY TAKEAWAYSThe secured overnight financing rate (SOFR) is a benchmark interest rate for dollar-denominated derivatives and loans that is replacing the London interbank offered rate (LIBOR).SOFR is based on transactions in the Treasury repurchase market and is seen as preferable to LIBOR since it is based on data from observable transactions rather than on esti

Nonfarm payrolls is the measure of the number of workers in the U.S. excluding farm workers and workers in a handful of other job classifications. This is measured by the Bureau of Labor Statistics (BLS), which surveys private and government entities throughout the U.S. about their payrolls. The BLS reports the nonfarm payroll numbers to the public on a monthly basis through the closely followed “Employment Situation” report.In addition to farm workers, nonfarm payrolls data also excludes some government workers, private households, proprietors, and non-profit employeesUnderstanding Nonfarm PayrollsWhile the name nonfarm payrolls insinuates that farm workers be excluded from the statistic, there are also several other categories that the BLS does not count when compiling nonfarm

A bull market is the condition of a financial market in which prices are rising or are expected to rise. The term "bull market" is most often used to refer to the stock market but can be applied to anything that is traded, such as bonds, real estate, currencies, and commodities.Because prices of securities rise and fall essentially continuously during trading, the term "bull market" is typically reserved for extended periods in which a large portion of security prices are rising. Bull markets tend to last for months or even years.KEY TAKEAWAYSA bull market is a period of time in financial markets when the price of an asset or security rises continuously.The commonly accepted definition of a bull market is when stock prices rise by 20% after two declines of 20% each.Trad

China Concept Stocks  is a set of stock of companies whose assets or earnings have significant activities in mainland China. The People's Republic of China is undergoing major financial transformation, and many leading mainland-based companies have chosen to list themselves overseas to gain access to foreign investor capital. Currently, there are China Concepts Stocks listed on several major stock exchanges around the globe, including the Hong Kong Stock Exchange (HKEx), Singapore Exchange (SGX), New York Stock Exchange (NYSE), NASDAQ, NYSE MKT (formerly known as the American Stock Exchange), London Stock Exchange (LSE), Euronext, and the Tokyo Stock Exchange (TSE).

Balance of trade (BOT) is the difference between the value of a country's exports and the value of a country's imports for a given period. Balance of trade is the largest component of a country's balance of payments (BOP). Sometimes the balance of trade between a country's goods and the balance of trade between its services are distinguished as two separate figures.The balance of trade is also referred to as the trade balance, the international trade balance, commercial balance, or the net exports.KEY TAKEAWAYSBalance of trade (BOT) is the difference between the value of a country's imports and exports for a given period and is the largest component of a country's balance of payments (BOP).A country that imports more goods and services than it export

The producer price index (PPI), published by the Bureau of Labor Statistics (BLS), is a group of indexes that calculates and represents the average movement in selling prices from domestic production over time.It is a measure of inflation based on input costs to producers.KEY TAKEAWAYSThe PPI is different from the CPI in that it measures costs from the viewpoint of industries that make the products, whereas the CPI measures prices from the perspective of consumers.The BLS separates PPI data into three main areas of classification: industry, commodity, and commodity-based final and intermediate demand (FD-ID).1The PPI is considered an objective tool for adjusting prices in long-term purchasing agreements.Understanding the Producer Price Index (PPI)The PPI measures&n

Gross domestic product (GDP) is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period. As a broad measure of overall domestic production, it functions as a comprehensive scorecard of a given country’s economic health.KEY TAKEAWAYSGross domestic product (GDP) is the monetary value of all finished goods and services made within a country during a specific period.GDP provides an economic snapshot of a country, used to estimate the size of an economy and growth rate.GDP can be calculated in three ways, using expenditures, production, or incomes. It can be adjusted for inflation and population to provide deeper insights.Though it has limitations, GDP is a key tool to guide policy-makers, investors, and businesses

The Purchasing Managers' Index (PMI) is an index of the prevailing direction of economic trends in the manufacturing and service sectors. It consists of a diffusion index that summarizes whether market conditions, as viewed by purchasing managers, are expanding, staying the same, or contracting. The purpose of the PMI is to provide information about current and future business conditions to company decision makers, analysts, and investors.KEY TAKEAWAYSThe Purchasing Managers Index (PMI) is a measure of the prevailing direction of economic trends in manufacturing.The PMI is based on a monthly survey of supply chain managers across 19 industries, covering both upstream and downstream activity.The value and movements in the PMI and its components can provide useful insight to busine

The ADP National Employment Report is a monthly report of economic data that tracks levels of nonfarm private employment in the U.S. It is also referred to as the ADP Jobs Report or the ADP Employment Report.KEY TAKEAWAYSThe ADP National Employment Report is a monthly report of economic data that tracks levels of nonfarm private employment in the U.S.Automatic Data Processing Inc., the firm that has prepared the report since 2006, handles payroll for about one-fifth of all privately-employed individuals in the U.S.The ADP National Employment Report is viewed as a useful preview to the more detailed Bureau of Labor Statistics' employment situation report.The ADP National Employment Report is divided into four separate releases.Understanding the ADP Nationa

The term economic moat, popularized by Warren Buffett, refers to a business' ability to maintain competitive advantages over its competitors in order to protect its long-term profits and market share from competing firms. Just like a medieval castle, the moat serves to protect those inside the fortress and their riches from outsiders.Understanding an Econonomic MoatRemember that a competitive advantage is essentially any factor that allows a company to provide a good or service that is similar to those offered by its competitors and, at the same time, outperform those competitors in profits. A good example of a competitive advantage would be a low-cost advantage, such as cheap access to raw materials. Very successful investors such as Buffett ha

Earnings per share (EPS) is calculated as a company's profit divided by the outstanding shares of its common stock. The resulting number serves as an indicator of a company's profitabilityThe higher a company's EPS, the more profitable it is considered to be.KEY TAKEAWAYSEarnings per share (EPS) is a company's net profit divided by the number of common shares it has outstanding.EPS indicates how much money a company makes for each share of its stock and is a widely used metric for estimating corporate value.A higher EPS indicates greater value because investors will pay more for a company's shares if they think the company has higher profits relative to its share price.EPS can be arrived at in several forms, such as excluding extraordinary items or discontinued operations, or on a diluted

The price/earnings to growth ratio (PEG ratio) is a stock's price-to-earnings (P/E) ratio divided by the growth rate of its earnings for a specified time period. The PEG ratio is used to determine a stock's value while also factoring in the company's expected earnings growth, and it is thought to provide a more complete picture than the more standard P/E ratio.KEY TAKEAWAYSThe PEG ratio enhances the P/E ratio by adding in expected earnings growth into the calculation.The PEG ratio is considered to be an indicator of a stock's true value, and similar to the P/E ratio, a lower PEG may indicate that a stock is undervalued.The PEG for a given company may differ significantly from one reported source to another, depending on which growth estimate is used in the calculation, such as on

The operating ratio shows the efficiency of a company's management by comparing the total operating expense (OPEX) of a company to net sales. The operating ratio shows how efficient a company's management is at keeping costs low while generating revenue or sales. The smaller the ratio, the more efficient the company is at generating revenue vs. total expenses.KEY TAKEAWAYSThe operating ratio shows the efficiency of a company's management by comparing the total operating expense of a company to net sales.An operating ratio that is decreasing is viewed as a positive sign, as it indicates that operating expenses are becoming an increasingly smaller percentage of net sales.A limitation of the operating ratio is that it doesn't include debt.What Does the Operating Ratio Tell You?

The net asset value (NAV) represents the net value of an entity and is calculated as the total value of the entity’s assets minus the total value of its liabilities. Most commonly used in the context of a mutual fund or an exchange-traded fund (ETF), the NAV represents the per share/unit price of the fund on a specific date or time. NAV is the price at which the shares/units of the funds registered with the U.S. Securities and Exchange Commission (SEC) are tradedNet asset value is commonly used to identify potential investment opportunities within mutual funds, ETFs or indexes. One could also use net asset value to view the holdings in their own portfolio. To invest in any of the aforementioned assets, an investment account would be needed.KEY TAKEAWAYSNet ass

The book-to-market ratio is one indicator of a company's value. The ratio compares a firm's book value to its market value. A company's book value is calculated by looking at the company's historical cost, or accounting value. A firm's market value is determined by its share price in the stock market and the number of shares it has outstanding, which is its market capitalization.KEY TAKEAWAYS:The book-to-market ratio helps investors find a company's value by comparing the firm's book value to its market value.A high book-to-market ratio might mean that the market is valuing the company's equity cheaply compared to its book value.Many investors are familiar with the price-to-book ratio, which is simply the inverse of the book-to-market ratio formula.Understanding the Book-to-Market Rat

Free cash flow (FCF) represents the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. Unlike earnings or net income, free cash flow is a measure of profitability that excludes the non-cash expenses of the income statement and includes spending on equipment and assets as well as changes in working capital from the balance sheet.Interest payments are excluded from the generally accepted definition of free cash flow. Investment bankers and analysts who need to evaluate a company’s expected performance with different capital structures will use variations of free cash flow like free cash flow for the firm and free cash flow to equity, which are adjusted fo