Market Correction

A market correction refers to a price decline of at least 10% of any security or market index following a temporary upswing in market prices. A market correction is often referred to as a “bubble bursting.” Essentially, before a correction occurs, the market is overloaded with unsustainable activity. During a correction, or when a bubble bursts, the free market must establish a new equilibrium price. Corrections are usually short-lived and resolve themselves in a matter of 3-6 months. However, some corrections are much longer and risk turning into full-blown recessions.