The canonical definition of a "correction" is a rapid 10% decline in market capitalization. I have some thoughts as to why. Equity markets tend to drift slowly

The canonical definition of a "correction" is a rapid 10% decline in market capitalization. I have some thoughts as to why. Equity markets tend to drift slowly higher when there is no new event or story taking place. This can be rationalized in many ways, but my personal explanation is that companies and industries tend to make money over time rather than overnight, and no news is good news in that environment. Valuations tend to pop higher on news about acquisitions or other big deals, as well as information injections about revenue and profit. But the concept of a "correction" implies that the prior price action did not align with the information in the market place. Due to the asymmetrical nature of human social behavior as well as the long bias in the equity market, that tends to be a downward force. I refer to asymmetry because humans react differently to a one-in-a-million disaster than to a one-in-a-million windfall. They communicate and feel differently about failures than successes. They more readily share their greatest joys than their mortal fears. Everyone likes a champion and everyone likes an underdog, but they are liked in different ways. Information travels and influences differently in good circumstances versus bad, so negative returns tend to be less frequent and more substantial in the equity space. Commodities don't work the same way. Shortages cause price spikes rather than crashes, and panic works to the upside rather than the downside. Yet commodity prices are often cyclical due to the dynamics of physical production, so the concept of a "correction" makes less sense due to an uneven natural trajectory in the uncorrected valuation.