A “correction” in the securities market is when the price of assets fall.
The market often gets overenthusiastic about securities and the prices go up more rapidly than justified. Once the market participants realise this mistake, the prices come down. Sometimes prices come down sharply, within a few days. Sometimes prices stay more or less stable for many months: this is known as a temporal correction. Or a “sideways market” (vs bull market and bear market).
The chart below is an example of a temporal corrcetion.
You’ll notice that from about early 2020 through the end of 2021, the asset value (current balance in the chart, the blue region) has gone up rapidly. Since then, the balance has been falling and rising. By the end of December 2023, the balance is back to where it was in December 2021.
Essentially, 4 years worth of appreciation was realised in just 2 years, between January 2020 and December 2021. Instead of sharply correcting the price, the market has been tepid throughout 2022 and 2023. This temporal correction brings the asset prices back to a reasonable range.
It’s anyone’s guess where the prices will go from here. If 2024 also remains tepid, then we’d say the temporal correction continues. If the prices go up, then we can say that the correction is over.
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