Do you remember?... the 21st of December (cue: Earth, Wind, and Fire jam). Back then: the stock market was hitting record highs left and right, and tech stocks were leading the charge. After peaking in mid-February, markets have fallen back to around December levels. Tech stocks got hit especially hard: the tech-heavy Nasdaq index is down 8% from its February 12th peak, and is up less than 2% for the year (after being up 11% at its high).
Why it's going down... Some investors think the tech sector is overvalued. Rising interest rates and inflation fears are also a huge part of it. Some worry that the Fed will raise interest rates to curb potential inflation, despite Jerome Powell saying (multiple times) that it’s unlikely to happen soon. To see why higher interest rates can be bad for stocks, check out our explainer.
Corrections are normal... For long-term investors, a correction can be like a small dip in the hill toward reaching investing goals. Historically, the market has recovered from corrections (though some took longer than others). While they might be painful short-term, corrections can help "correct" the prices of overvalued stocks. Markets were frothy at their peak — a correction is kind of like a barista skimming off foam. In the past, they've been followed by periods of growth. The US stock market has had more than 25 corrections since WWII.