Glossary · Stocks and markets
Market correction
A market correction is a fall of 10% to 20% in stock prices from a recent peak: deeper than a dip, shallower than a bear market.
Also called: correction, stock market correction, pullback
S&P 500 falls of 10% to 20%, monthly averages. The latest: 2025 (−11.1%).
In plain words
Prices have run up for months, then slide: 5%, 8%, 12% below the top. Commentators say the market is “correcting”, as if it had got ahead of itself. By convention, a fall of 10% to 20% from a peak is a market correction.
Corrections are common and usually short. Counting with monthly averages, the S&P 500 has had 14 of them since 1950, roughly one every 6 years, falling 14% on average.
If a fall goes past 20%, it is no longer called a correction but a bear market. Nobody knows in advance which one a fall will become.
Example
Correction arithmetic
- An index peaks at 5,000.
- It falls to 4,500: −10%. A correction has begun.
- It bottoms at 4,200 (−16%), then recovers. That fall was a correction.
- Had it dropped to 4,000 (−20%), it would have become a bear market.
The words describe the depth of a fall, not its cause.
One level deeper
Why “correction”? The word suggests that prices had risen too far and are coming back to a sensible level. That is a story, not a measurement: many corrections are set off by news (a rise in interest rates, a weak economic report, a political shock) that later turns out to matter little.
The latest on our monthly count ran from Feb 2025 to Apr 2025, a fall of 11.1%. Corrections since 1950 lasted 7 months on average from peak to low.
Monthly averages make falls look smaller than daily prices do. Some corrections of about 10% in daily closes, such as in early 2018 or late 2023, barely show in monthly data, while the crash of February–March 2020 shows here as a correction, though daily closes fell about a third.
Every correction since 1950
Falls of the S&P 500’s monthly average of 10% to 20% from a peak, outside bear markets. They came every few years, some after long calm stretches, some in clusters.
The numbers behind the chart
| Fall from the peak | |
|---|---|
| 1953 | 11.1% |
| 1956–57 | 10.9% |
| 1957 | 16.9% |
| 1959–60 | 10.1% |
| 1966 | 17.3% |
| 1976–78 | 15.8% |
| 1980 | 10.7% |
| 1980–82 | 19.4% |
| 1990 | 14.8% |
| 1998 | 11.8% |
| 2011 | 12.3% |
| 2018 | 11.5% |
| 2020 | 19.1% |
| 2025 | 11.1% |
Why it matters
Corrections are a normal part of owning stocks: expecting none means being surprised every few years.
They show how much the market can drop without anything being badly wrong.
They test nerves: a 15% fall on a large portfolio is a lot of dollars, even though it is an ordinary event in market history.
A common mistake
Myth: Every fall of 10% turns into a bear market.
In fact: Most did not. Since 1950, the S&P 500’s monthly average fell 10% or more 21 times; 7 of those falls went on past 20%.
Questions people ask
How often do market corrections happen?
Counting with monthly averages, the S&P 500 had 14 corrections since 1950, about one every 6 years. Counted with daily closes there are more, because short drops show up too.
How long does a correction last?
From peak to low, 7 months on average on our monthly count; in daily data many last only weeks.
What is the difference between a correction and a crash?
A correction is defined by depth (10% to 20%), a crash by speed: a very sharp fall in a day or a few days, such as on October 19, 1987. A crash can be part of a correction or of a bear market.
Read more on BigCapital
About the numbers
- The numbers on this page are recalculated from the data every night; the sources are listed at the end of the page.
- S&P Composite price and total return since 1871, and US consumer prices: Robert J. Shiller, Online Data (shillerdata.com); total return with dividends reinvested monthly, calculated by BigCapital.
- This page explains a term. It is not investment advice.