The Nasdaq fell into correction territory on Thursday, down 10.7% from its October high. The Dow joined it today, dropping 10% from its recent peak. The S&P 500 is close behind, down 7.1% and needing just another 3% to make it official.

When was the last time all three major indexes were in correction at once? April 2025, during Trump’s Liberation Day tariff chaos. Before that? You have to go back to 2022.

This doesn’t happen often. And when it does, it’s worth understanding what it means—and what usually happens next.

A correction is a decline of 10% or more from a recent high. It’s less severe than a bear market, which requires a 20% drop. The Nasdaq confirmed its correction Thursday after falling 2.4%, marking its worst single day since January 20. The Dow crossed into correction territory today after dropping another 1%.

The Nasdaq 100 is down 11% from its October peak, meaning the tech-heavy index has fallen even further than the broader Nasdaq Composite. Both are now officially in correction.

Here’s the damage by the numbers:

• Nasdaq Composite: Down 10.7% from October 29 all-time high
• Dow Jones: Down 10%+ from recent high (entered correction Friday)
• S&P 500: Down 7.1% from record high (on track for fifth straight weekly loss)
• March decline: S&P 500 down 6.8% for the month—the biggest monthly drop since December 2022

The immediate cause is the Iran war. Oil prices surged 40% since the conflict began on February 28, with Brent crude hitting $111 today.

The Strait of Hormuz remains largely closed, disrupting 20% of global oil shipments. Rising energy costs are feeding inflation fears while threatening economic growth—the exact combination that makes central banks’ jobs impossible.

Treasury yields climbed to their highest levels of the year, with the 10-year note pushing toward 4.4%. Higher yields mean more expensive mortgages, car loans, and business financing. Mortgage rates have jumped from around 6% before the war to more than 6.5% now.

The Fed is stuck. Two rate cuts were expected for 2026 before the war started. Now? Traders aren’t pricing in any cuts. In fact, futures markets show a 52% probability that the Fed will raiserates by year-end—the first time that metric has crossed 50% since the war began.

Thursday marked the worst single day for the S&P 500 and Nasdaq since the war started. Both indexes fell more than their combined declines across the previous three trading days. Volatility spiked, with the VIX fear index jumping above 28—well above its normal 12-20 range.

The selling was broad. All 11 S&P 500 sectors lost ground Thursday. The Philadelphia Semiconductor Index tumbled 4.8%. Nvidia, the AI chip leader, fell more than 4%. Memory chip stocks continued their slide after Google unveiled technology that could reduce AI memory requirements by 6X.

Big Tech—which powered the bull market for the past three years—is leading the decline.Four of the 10 largest S&P 500 companies are down more than 20% from their 52-week highs, meaning they’re already in individual bear markets even as the broader index sits in correction territory.

So what happens next?

History offers some guidance. According to data from Bespoke Investment Group, the average S&P 500 correction (a decline of 10-20%) resolves in about four months. Bear markets—declines of 20% or more—take longer, averaging about 9.5 months to bottom out.

The good news: Corrections are common and recoveries tend to be swift. The S&P 500 has never posted a negative 20-year return, and 94% of rolling 10-year periods have been profitable. If you have a five-year-plus investment horizon, buying during corrections has historically been a winning strategy.

The last time all three major indexes were in correction simultaneously was April 2025, when Trump’s Liberation Day tariffs sent markets tumbling. Stocks recovered to new highs within months. Before that, the synchronized correction happened during the 2022 bear market, which took nine months to resolve.

This time feels different because of the unique combination of risks: a shooting war disrupting global energy supplies, surging inflation, slowing growth, and a Fed that can’t cut rates to help. It’s a stagflation setup—rising prices and falling economic activity—that hasn’t been seen since the 1970s.

Still, the fundamentals of investing haven’t changed. Corrections create opportunities to buy quality companies at lower prices. The challenge is separating companies that are temporarily beaten down from those that are genuinely overvalued.

Some stocks ran too far, too fast. Companies valued primarily on future earnings potential rather than current profits are getting hit hardest. That’s why the Nasdaq—packed with high-growth tech stocks—fell into correction first and deepest.

But not every company in a correction is a bargain. A stock that’s down 20% from its high isn’t necessarily cheap if it was overvalued to begin with. The key is finding businesses with strong fundamentals, reliable cash flows, and reasonable valuations that are selling off due to broader market fear rather than company-specific problems.

Defensive sectors like utilities, consumer staples, and healthcare tend to hold up better during corrections because their revenues are less dependent on economic growth. Energy stocks are the exception right now—they’re up 25% in 2026 thanks to soaring oil prices, making them one of the few bright spots.

For investors with cash on the sidelines, corrections offer entry points. For those already fully invested, the best move is usually to do nothing. Selling during a correction locks in losses and requires two correct decisions: when to sell and when to buy back in. Most investors get at least one of those wrong.

The S&P 500 needs to fall another 3% to join the Nasdaq and Dow in correction territory. Given the five straight weeks of losses and mounting economic concerns, that seems likely.

The question then becomes whether the correction stops at 10% or accelerates into a 20% bear market.

The answer depends largely on the Iran war. If the conflict resolves quickly and the Strait of Hormuz reopens, oil prices could fall and the correction could end as fast as it started. If the war drags on—or escalates—the economic damage will mount and a bear market becomes more probable.

Trump extended his deadline for Iran to reopen the Strait to April 6, claiming talks are “going very well.” The market’s reaction suggests skepticism. Stocks fell despite the extension, and oil prices kept climbing.

Corrections are uncomfortable but normal.They’re part of investing. The key is keeping perspective: this is a 10% decline, not a collapse.

Companies are still making money. The economy is still growing, albeit more slowly.

And history shows that buying during corrections, when everyone else is selling out of fear, has been one of the most reliable wealth-building strategies over time.

The Nasdaq and Dow are officially in correction. The S&P 500 will likely follow. What you do next matters more than what the market does tomorrow.

-Good Morning Alerts

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