There are levels to many things. Stock market included. As of 2021, we just got out of the 2020 recession, but what is the DIFFERENCE between a recession and a correction?
A correction has to reach an ACCEPTED drop to qualify. This usually happens in a commonly used index, such as the S&P 500 or the NASDAQ, to qualify to be a correction.
A recession, on the other hand, tends to be much more severe. In March of 2020, we had a stock market recession where many stock market circuit breakers were used. Stock market circuit breakers are in place to help alleviate short term extreme selling pressures that may occur due to many reasons, but specifically for emotional selling. Like the correction, there is no real number that needs to be reached to qualify to be a recession. However, it can be defined as a fall in GDP for two consecutive quarters (according to Investopedia). This is most recently shown in 2020 when the coronavirus pandemic arrived on a global scale.
In terms of investing, there tends to be a market pullback of some sort every year; there tends to be a market correction once every 1.87 years according to the Motley Fool. This can help you with investing and trading strategies depending on how the year has performed. You can make predictions and potentially start hedging your investments based on this type of information. Hopefully, this helps you develop a better understanding of the overall general market. But until next time…
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*Note: I am not a financial advisor. This is for entertainment purposes only.