Market Correction
A short-term decline of 10–20% in a stock index or asset price from a recent peak.
What is Correction?
A market correction is a decline of 10% to 20% in a stock index or individual security from its most recent peak. Corrections are considered a normal and healthy part of market cycles, preventing overvaluation and giving long-term investors opportunities to buy at lower prices. They are distinguished from bear markets (which require a 20%+ decline) by their shallower depth and typically shorter duration. On average, the S&P 500 experiences one correction per year, with most lasting less than four months before recovering to new highs.
Example
The S&P 500 fell approximately 19% from its January 2022 peak to its March 2022 trough, driven by concerns over rising inflation and imminent Federal Reserve rate hikes. The correction briefly approached bear market territory before stabilizing.
Source: Investopedia — Correction