What it is
A market correction is a temporary reversal in the upward trend of a financial market, typically defined as a decline of 10% to 20% from a recent peak in a broad market index or individual asset. Corrections are considered a normal and healthy part of market cycles, often occurring after periods of strong gains or in response to minor economic concerns, geopolitical events, or shifts in investor sentiment. They are generally shorter in duration than bear markets.
Corrections are often followed by a resumption of the prior upward trend, as underlying economic fundamentals remain strong. While they can be unsettling for investors, they also present opportunities to buy assets at lower prices. News reports during a correction will often discuss the catalysts for the decline, such as rising interest rates or inflation concerns, and debate whether the correction might deepen into a full bear market or quickly rebound.
Why it matters
A market correction is a normal part of market cycles, offering potential buying opportunities but also signaling increased short-term risk.
Reviewed under editorial standardsUpdated September 26, 2026Not investment advice