JBL Financial Blog

Pullbacks, Corrections, and Bear Markets, Oh My!

Erin Lapidus Friday, July 22, 2022

Three Terms You Don't Want to Forget

When the market drops, some investors lose the perspective that downtrends and uptrends are part of the investing cycle.  Follow the yellow brick road to review common terms that are used to describe the current market's downward momentum.

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Pullbacks.

A pullback represents the mildest form of a selloff in the markets. You might hear an investor or trader refer to a dip of 5-10% after a peak as a "pullback."1

Corrections.

The next degree in severity is a "correction." If a market or markets retreat 10% to 20% after a peak, you’re in correction territory. At this point, you’re likely on guard for the next tier.2

Bear Market.

In a bear market, the decline is 20% or more since the last peak.2

All of this is normal.

"Pullbacks, corrections, and bear markets are a part of the investing cycle." 

When stock prices are trending lower, some investors can second-guess their risk tolerance. But periods of market volatility can be the worst times to consider portfolio decisions.

Pullbacks and corrections are relatively common and represent something that any investor may see from time to time in their financial life, often several times over the course of a decade. Bear markets are much rarer. In fact, between April 1947 and September 2021, there have only been 14 bear markets.3

A smart strategy with an experienced financial advisor will help you make necessary decisions along the way as you continue to pursue your goals of a secure retirement. Because as we know, there's no place like home! 

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1. Investopedia.com, August 23, 2021
2. Forbes.com, September 20, 2021
3. Investopedia.com, October 29, 2021

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