Listening to a guy yesterday that defined the terms in the title in a way I don't normally use them. Some will say it's semantics. That's fine.

A "crash", like 2008, didn't really "correct" anything in the markets. We received a bunch of blowhard nonsense policy and trillions more in debt from government. The Fed threw meat to the lions and we continued business as usual. Nothing really got fixed. He stated, "The stock market could "crash" 40% today and people would back the truck up and carry on...business as usual." Not considered a correction...

A "correction" is more deeply psychological. One could say it is a degree of punishment for poor choices which forces many out of their current trading headspace. In essence, it is a trust defining moment of one's ability to reason or analyze market dynamics. A correction is a very chaotic time in markets where nothing makes sense, forcing a return to basics and a lot of introspection becomes the order of the day.

If that is the case, when was the last correction? When was the last time anyone had to take a deep look into their trading psychology? The depression? I've had those moments on a personal level several times in my life, as many of us do. Unfortunately, I don't think the institutions have had to deal with a true correction in a long time.

Thoughts?

I guess it depends on how you view things, but I disagree.

Both 2000 and 2008 were considered crashes. Both took multiple years to complete. The market didn't recover and get over 2000's level until 2013. That was absolutely a correction. Both were a part of the larger correction that took 9 years to complete. While they were both crashes, each was a phase correcting overvalued bubbles within an economy that was deteriorating. Without the help of Congress changing the rules and the FED stepping in to "borrow" deposits from banks, leverage them, and loan out an expanded money supply while directly becoming the primary buyer in the treasury market, there would have been no "recovery". So you are right that nothing got fixed. Instead, we entered war time spending, devalued the purchasing power of the dollar, and exploded our debt to stimulate the economy in an effort kick the can of a full blown deleveraging and maintain the facade of prosperity.

2020 was more of what you describe of a crash. And it recovered so incredibly quickly directly because we did the same thing we did in 2008, but threw caution to the wind and did it 4x as hard, cementing that we were going to kick this can as far as we possibly could.

2022 was a pretty classic correction. Market was again critically overvalued, and once inflation became too obvious to ignore (transitory), the reality of the situation shifted perception of everything in the entire world.

If you want to see what rather normal corrections can look like, you need to go look at SPX between the 1950's and 1970's. The 60's were pretty similar to the 2020's in that the spending we had deployed to stimulate the economy after the war had finally come to a head and was showing up as inflation. Social unrest grew extreme with an assassination of MLK, multiple wars in the world, an assassination of a Kennedy, a sitting president stepping down and his VP announcing candidacy, and mass rioting and protests. This led directly to a FED heavy hand decade to attempt to get inflation under control which reset perception of the economy and markets. Within this multi-decade period, you had periods of strength in the markets fueled from inflationary earnings growth, and periods of weakness due to the general weak sentiment, declining purchasing power in the economy, and a loss of faith in the government and FED to be able to accurately assess the path forward.