When markets fall, it’s easy to forget that downturns are a normal part of the investing journey. Sudden headlines and volatile prices can stir emotions, but market declines—whether brief or extended—are not uncommon. In fact, they’re built into the natural cycle of investing.
So, when prices slip, it’s a good time to revisit some common terms you may hear in the news or from financial professionals. Understanding what they mean can help you stay grounded and avoid emotional decisions.
What Do We Call a Market Drop?
Let’s break down a few key terms:
Pullback
A pullback is the mildest form of a market decline. It refers to a drop of about 5% to 10% from a recent high. Pullbacks often happen quickly and can be short-lived—sometimes just a brief pause during a longer-term upward trend.
Correction
A correction occurs when the market drops 10% to 20% from its recent peak. These are more noticeable and can feel alarming, but corrections are surprisingly common. Historically, they’ve occurred about once every 1–2 years and often represent a healthy reset in overheated markets.
Bear Market
The term bear market describes a more severe decline—typically a drop of 20% or more from the market's most recent peak. Bear markets can feel unsettling, but they’re not permanent. Over time, markets have consistently recovered from bear markets and gone on to reach new highs.
Staying Focused Through Uncertainty
When prices trend lower, it’s natural to second-guess your decisions. You might find yourself wondering, “Should I have done something differently?” or “Is this the time to make a change?”
But here’s the truth: We built your investment strategy with times like these in mind.
Your portfolio is aligned with your long-term goals, time horizon, and risk tolerance. It wasn’t designed just for the good times—it was created to weather the inevitable ups and downs of the market cycle.
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The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. This content is for informational purposes only and should not be considered investment, tax, or legal advice. Please consult a qualified professional regarding your specific situation.