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Stock market pullback, correction, crash: How to tell the difference
pullback can morph into a correction and then cascade into a crash. Most times, though, the degree of the market fall is evident pretty early. One key difference among the three classes of market descents is how large the problems were that triggered the drops in the first place.
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Pullbacks are dips of 5% to 10% from a recent market high, and are short-term, lasting a month on average and taking another month to retrace the losses,Pullbacks often result from news events that turn out to be of fleeting important. Look at the last one, in September. The S&P 500 sunk 5.2% amid congressional wrangling over the national debt ceiling, a kerfuffle that got resolved, at least for the moment.
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Corrections are slides between 10% and 20, violent affairs with high volatility—rapid buying and selling as freaked-out investors unload their positions. These market falls tend to last four months, with an equal period to get back to where they were. Corrections usually have their roots in more serious concerns. The last one, in late 2018, when the index dove 19%, occurred as the US-China trade war intensified and interest rates mounted.
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Crashes are downturns of more than 20%. They’re almost always the prelude to a recession. Crashes typically are born of deep economic crises, often global in scope, such as the 2008 sub-prime mortgage debacle (the S&P 500 fell 57% then) or the pandemic shutdowns (off 34%). Since 1946, there have been 12 crashes, with average losses around 35%, and the market can take up to four years to recover.
Market debacles are as inevitable as heat waves. As long as you can afford to ride out the worst times, you can emerge intact or even ahead. ![]()
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奥斯卡是小金人 : then the current one is more like a pullback, with almost 10% dip and the worries/concerns over interest rate hike.
Shappa65 : So it would appear to be a beneficial time to buy some of the more costly stocks (i.e., Facebook/Meta) , as once the market begins its upward swing the price will become unaffordable for many.
mooster Han OP 奥斯卡是小金人 : I think it has gone into correction this time
mooster Han OP Shappa65 : It depends on your investment
奥斯卡是小金人 mooster Han OP : Yep enters correction this week