President Donald Trump’s tariffs have sent shockwaves through the global markets — that includes retaliatory tariffs from our trade partners.
Whether or not they’ll pay off for Americans is anyone’s guess.
Regardless, Trump’s seemingly rapid-fire tariffs as well as the fear of a recession have put finance at top of mind for most Americans. In fact, recession odds are up to 66%, according to the prediction market Kalshi.
So whether you’re an economic guru or a novice, these are 10 finance terms you need to know.
Asset
An asset is anything of value that you own — literally anything from cash to property to investments — that boosts your financial strength. Assets form the backbone of your net worth, giving you options and security in both good times and rough patches. They fuel growth and provide a foundation for building lasting wealth.
Bear Market
A bear market is when the value of stocks — or the broader market — drops sharply and stays low for a while. It usually means a decline of 20% or more from recent highs, and it reflects fear, uncertainty, or a rough economic outlook. People sell more, prices fall further, and confidence takes a hit.
Wildly, the term bear market comes from bear skin trading. In the 18th century, traders who sold bear skins they didn’t yet own — hoping to buy them later at a lower price — were called “bearskin jobbers.” It was a bet that prices would fall, much like investors in a bear market.
The bear itself, moving slowly and swiping its paws downward, became a natural metaphor for declining prices — opposite the bull, which we will get to momentarily.
Bull Market
A bull market is a period when prices in the stock market — or other markets — are rising or expected to rise. It’s usually marked by strong investor confidence, steady economic growth, and increasing demand. Picture a bull charging forward, tossing its horns upward — that’s the energy and direction of a bull market: fast, strong, and full of optimism. The term bull market comes from how a bull attacks: horns up.
Capital
Capital is the financial fuel used to invest in opportunities, whether it’s starting a business or growing your wealth. It’s money or resources that help generate income, drive innovation, and support economic activity. Capital is the lifeblood of progress, enabling you to leverage assets and build a secure future.
Diversification
Diversification means spreading investments across various asset classes to manage risk and enhance potential returns. Instead of putting all your funds into one basket, you balance your portfolio by offsetting losses in one area with gains in another. This approach shields you from market swings while promoting long-term stability.
Equity
Equity represents your ownership stake in an asset or company after subtracting liabilities. It’s what you truly own, whether in a business, real estate, or stocks, and it grows as the value of those assets rises. Equity is a powerful measure of personal wealth and a key driver in building financial security.
Inflation
Inflation is a rise in prices over time, which erodes the purchasing power of money, and we’ve all felt it. As everyday costs increase, each dollar buys less than before. While moderate inflation is normal in a growing economy, rapid inflation can diminish savings and disrupt financial plans, making it crucial to factor into long-term strategies.
Interest Rate
An interest rate is the percentage cost of borrowing money or the return on investments like bonds. It affects how much extra you pay or earn over time and plays a central role in monetary policy and personal finance decisions. Rates guide loans, savings, and overall economic activity, influencing market behavior.
Liquidity
Liquidity describes how fast and easy (sounds like a bad sex joke) you can convert an asset into cash without affecting its market value. High liquidity means fast access to funds when needed, a crucial indicator of financial health. It ensures you’re not locked into investments, allowing you to respond promptly to opportunities or emergencies.
Portfolio
A portfolio is a collection of investments—stocks, bonds, real estate, and more—curated to achieve your financial goals. It reflects your risk tolerance and strategy for building wealth over time. A well-balanced portfolio diversifies risk, captures growth potential, and offers a pathway to long-term financial security.
Recession
A recession is a notable, extended economic downturn marked by falling GDP, rising unemployment, and reduced consumer spending. It’s a period when the economy contracts, often impacting business performance and financial stability. During recessions, careful budgeting and strategic investments become crucial for weathering the storm and bouncing back.
Tariff
Tariffs are taxes placed on imported goods by a government to raise revenue or protect domestic industries. They make foreign products more expensive, encouraging consumers to buy local. While tariffs can support homegrown businesses, they can also lead to higher prices and trade tensions if other countries retaliate.
Volatility
Volatility refers to how much and how quickly asset prices fluctuate in the market. It’s a measure of uncertainty and risk that can signal both opportunities and dangers. High volatility means rapid price swings, challenging investors to balance potential gains with the inherent risks of unpredictable market movements.
