It’s a Jungle out there!

Ever noticed how many animal-related references are used in the finance world? In the past we have written articles about pigs, wolves, bunny markets, and more recently explained a bull versus a bear market. Yet, we still haven’t covered all the animal terms- it’s a real jungle out there!

If you watch the news after a US Fed meeting you will often hear the terms “dovish” and “hawkish” used a lot in the post-meeting analysis and so I decide that the next set of animal financial terms I would share are the ones that relate to two-winged animals- spoiler, there are more than just doves and hawks.

Doves, Hawks… and Pigeons?

The terms “doves” and “hawks” are used most often whenever we hear from central banks regarding monetary policy. Doves are policy makers who are in favour of looser monetary policy, keeping interest rates low with the aim of boosting economic growth. This should increase spending and borrowing, benefitting the economy and increasing employment, but it could come with the risk of rising inflation.

Hawks tend to project higher future inflation, and hence see more risk from inflation. As a result hawks see a greater need for tight monetary policies, favouring higher interest rates to keep inflation in check.

Believe it or not, hawks and doves are not the only types of policymakers. Officials who neither particularly hawkish nor dovish, falling more in the middle, are often called “pigeons” or “centrists”.

Chickens, Ostriches and Black Swans, oh my!

Various animals are used to describe different types of investor behaviours or markets because of particular characteristics those animals have or imagery that those animals bring to mind. For example, chickens have a reputation for being scared of everything. Chicken investors approach the market with the same kind of trepidation. They “cluck” around with no particular plan and are easily spooked by any kind of loss. Since their fear easily overrides common sense, they tend to not be very successful investors.

When you think of an ostrich do you think of them sticking their heads in the sand? If so, then you will understand why the term “ostrich” is used to describe investors who tend to ignore negative news that can impact their investments. They would much rather stick their heads in the sand, so to speak, to avoid seeing any big declines in their portfolio.

In the financial world, black swans represent unpredictable, massively transformative events that can shape the world and, in turn, the investment landscape. The reason these events are referred to as black swans is because of how rare they are. The collapse of Lehman Brothers and the 2008 financial crisis are considered recent examples of black swans and of course the COVID-19 pandemic was a quintessential black swan event.

The next time someone talks about hawkish, dovish, bullish or bearish, you can impress them with your knowledge of some of the less commonly used animal terms. I am sure there are more, but we will save those for another day!

Toni-Ann Neita-Elliott, CFP is VP Marketing & Sales at Sterling Asset Management. Sterling provides financial advice and instruments in U.S. dollars and other hard currencies to the corporate, individual and institutional investor. Visit our website at www.sterling.com.jm

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