Real vs. Nominal Return
Return after inflation versus the headline number.
What is Real vs. Nominal Return?
Nominal return is what the statement shows; real return subtracts inflation and is what actually changes purchasing power. Every retirement projection should be framed in real terms.
Real vs. Nominal Return: a worked example
7% nominal with 3% inflation is roughly a 4% real return.
More terms in Macro & Markets
Inflation
A general rise in prices that erodes purchasing power.
Federal Funds Rate
The overnight interbank lending rate targeted by the Fed.
Monetary vs. Fiscal Policy
Central bank rate and money supply tools versus government tax and spending.
Yield Curve
A plot of Treasury yields across maturities.
Yield Curve Inversion
Short-term yields exceeding long-term yields - a recession signal.
Recession
A significant, broad, sustained decline in economic activity.
Quantitative Easing
Central bank purchases of long-dated assets to push down long rates.
Gross Domestic Product (GDP)
The total value of goods and services produced in an economy.