The corrections: The markets are way down amid Iran war chaos

It sounds benign, but a “correction” in the finance world is an unpleasant word indeed. And it’s right on our doorstep.

On Friday, the Dow Jones Industrial Average fell another 444 points, landing at 45,577.

When you compare that to a high of 50,188 reached only on Feb. 10, that marks a drop of 9.2 per cent.

A correction means a drop of at least 10 per cent, so you can see why the word has been popping up in news coverage lately.

From this CNN report:

The Nasdaq during trading dipped into correction territory before paring some losses heading into the closing bell. The Nasdaq is down 9.65% from its peak in late October, putting the index on the verge of a correction. The Dow is down roughly 9.2% from its peak on February 10, and the S&P 500 is down 6.77% from its peak in late January.

The S&P and Nasdaq on Friday each closed at their lowest level since September, erasing six months of gains. The Dow closed at its lowest level since October.

There’s more, too. The lesser-known Russell 2000 index, which focuses on smaller companies (or so-called small caps), has already passed the 10 per cent mark, becoming on Friday the first index to move into correction territory.

For a lot of people, what happens in the stock markets is like another universe, or perhaps they see fat cats getting their just desserts. (That’s not entirely wrong.)

But the markets sooner or later involve all of us. It’s key infrastructure in the entire economy, from pension funds (which have long been among the biggest investors) to consumer spending to the interest payments on credit cards to the cost of gas and, well, everything.

It’s all connected.

Things had already been swinging wildly on the markets before Donald Trump announced the first air strikes against Iran on Feb. 28. That was a weekend, of course, so the markets could not really react for a couple of days. And while the Dow went down, the big hits have been in the last couple of weeks, as Trump has struggled to show a coherent plan for a war. (Add to the mix that many American companies hit hard by their own country’s tariffs are now dealing with massive spikes in the cost of gas.)

A correction does not mean a recession is immediately upon us.

But continued drops could push the Dow into what’s called a bear market, which would be 20 per cent down from February’s peak.

In other words, keep holding onto your hat. There’s no doubt more turbulence ahead.