Market Correction

A market correction refers to a short-term decline in the price of a financial asset or market index, typically by 10% or more, following a period of rapid gains. Corrections are seen as a natural part of market cycles and can be triggered by changes in economic conditions, investor sentiment, or external shocks. While corrections can create temporary volatility, they are often viewed as opportunities to buy assets at lower prices.

Example

After several months of rapid gains, the stock market experiences a 12% decline, which analysts describe as a market correction due to profit-taking and economic uncertainty.

Key points

• A short-term decline in the price of an asset or market index, typically by 10% or more.

• Follows a period of rapid gains and can be triggered by economic or external factors.

• Viewed as a normal part of market cycles and may present buying opportunities.

Quick Answers to Curious Questions

What is a market correction?

A market correction is a short-term decline in the price of a financial asset or index, typically by 10% or more.

What causes market corrections?

Corrections can be caused by economic changes, shifts in investor sentiment, or external shocks that lead to profit-taking or selling pressure.

Why are market corrections seen as buying opportunities?

Corrections often create temporary declines in asset prices, allowing investors to buy assets at a discount before prices recover.