Markets · Investing Glossary
What Is Market Correction?
A pullback of 10–20% from recent market highs.
The Full Definition
A market correction is a decline of 10% to 20% from a recent market peak. Corrections are a normal, healthy part of market cycles — they occur roughly once a year on average in the US stock market and serve as a reset from stretched valuations. They feel uncomfortable but are temporary. The difference between a correction and a bear market is magnitude: corrections are 10–20% declines; bear markets are 20%+.
Real-World Example
The S&P 500 corrected about 10–15% multiple times in the 2010–2020 bull run — in 2011, 2015–16, and 2018 — before recovering to new highs each time. Investors who sold during corrections missed the subsequent rallies.