13 September 2024

Glossary of key terms

Glossary of key terms for the Autumn 2024 edition of Prospects.


‘Defensive’ stocks/sectors – shares in companies that tend to be more immune to economic downturns. This could for example include consumer staples, healthcare or utility companies.  

Hard/soft landing – A ‘hard’ landing refers to a period of economic slowdown caused by central bank tightening that triggers a recession.  In a ‘soft landing' despite tightening, recession is either mild or avoided.

Headwinds/tailwinds – headwinds are factors likely to negatively affect a company, tailwinds on the other hand are likely to have a positive impact.  

Net interest margins – a measure of profitability for financial institutions. It is the difference between the interest income they generate from borrowers and the amount of interest they pay out to lenders. 

Operating margins – operating profit is a company’s earnings before interest and tax, calculated by subtracting operating costs from revenue. Operating margin is calculated by dividing operating profit
by revenue.

Price/earnings ratio – a ratio derived by dividing a company’s share price by its earnings per share. It is a relative valuation measure to determine if a company’s share price could be over or undervalued relative to its earnings.

‘Sticky’ inflation – Persistently elevated levels of inflation within an economy, typically associated with core measures where prices do not adjust as quickly to supply and demand changes.

Understanding Finance

Helping clients understand what we do is key to building relationships. To explain some of the industry jargon that creeps into our world, we’ve pulled together a section of our site to help.

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