Well, I promised to be “off the air” but I when I watch the various financial websites claim we are “in a correction” it really gets my rockets going. Saying we are in a “correction” would be like calling the ER via radio, enroute Code-3, with a bullet wound victim in one stretcher, and a paper cut victim in the other stretcher, and saying you are inbound with two blood loss victims.
The below definitions are “generally accepted” definitions used in the professional investment world:
Correction: A loss in 10%, from the high, but below 20%, in an index. Indeed these happen on a semi-frequent basis, the February 2018 market displayed this, note that I remained in stock funds in my personal TSP.
Bear Market: A loss of 20%, or more, in an index. (Indeed, to get to 20%, you must break 10%). Also associated with oft-used dystopian terms such as “crash” / “meltdown” / “crisis” / etc. These are infrequent in nature.
I see many sites claiming “this is a correction” , “a mere correction” , “after this correction, it will rebound” etc.
For the record, Dow Jones Index and NASDAQ are both in Bear Markets. The S&P 500, currently with a 17.8% loss, is close to a Bear Market. Please see below images from Kiplingers, Zacks Finance, and Charles Schwab, all respected and well known in the investment sector.
Hope this clarifies the difference….Merry Christmas….going “off the air” (second attempt…)
-Bill Pritchard
