The Nasdaq Has Officially Entered a Correction. Here's What That Means for Investors

After losing 2.38% through Thursday's market close, the Nasdaq has officially entered a correction.

Since its year-to-date high on Jan. 28, the tech-heavy index has now fallen by 10.27%. It's down 10.65% from its all-time high on Oct. 29 as ongoing losses in Magnificent Seven stocks and geopolitical unrest have roiled markets around the globe.

An extended pullback that began in the final quarter of 2025 — fueled by concerns over AI's potential impact on Software-as-a-Service (SaaS) firms — has carried through the first quarter of 2026. More recently, losses have been amplified by the war in Iran, which has disrupted energy infrastructure and global trade routes while sending oil costs above $100 per barrel.

Compounding matters, the market cap-weighted index has suffered as investors continue to rotate out of higher-risk sectors like technology and communication services and into cyclical and defensive sectors, like energy and consumer staples. That rotation has accelerated amid deteriorating macroeconomic conditions, including waning consumer confidence, a tepid labor market and sticky inflation.

Market corrections — losses of between 10% and 20% from recent highs — are fairly normal, occurring on average once a year. But they can last for months. Since 1987, corrections have lasted between 74 and 155 days, meaning they can have outsized impacts on unprepared investors' portfolios for extended periods.

Why are tech stocks down in 2026?

After posting market-leading gains of 40% and 34% in 2024 and 2025, the tech sector has faltered in 2026. The cohort has lost 8% year-to-date, making it the fifth worst performer among the S&P 500's 11 sectors.

But those losses have been more pronounced in the Nasdaq. While the Magnificent Seven's total weighting accounts for 30% to 35% of the S&P 500, it makes up 40% to 45% of the Nasdaq.

While their collective performances haven't inspired investors, some of their underperformances — including YTD losses of 15% for Tesla and 23% for Microsoft — have paled in comparison to those of some SaaS stocks.

Shares of The Trade Desk, for example, are down 43% this year as the market has turned against companies that deliver cloud-based software applications, despite their high-margin subscription models that generate recurring revenue resulting in comparatively healthy earnings. Others, like project management software developer Atlassian, have seen year-to-date losses in excess of 55%.

What investors should do now

On Thursday, President Donald Trump extended a pause on striking Iran's energy infrastructure until April 6, citing ongoing talks. But with no material indications of a forthcoming ceasefire, more ups and downs are likely in store.

The CBOE Volatility Index — the oft-mentioned measure of the stock market's expectation of volatility — is up more than 94% this year, including a 14% increase over the past week.

For long-term investors, ongoing losses present an opportunity to purchase shares of former market-leading stocks at notable discounts. While that also applies to passive index fund investors, those practicing dollar-cost averaging can largely disregard the Nasdaq's correction, as that strategy entails buying shares on a recurring basis regardless of price.

Investors with shorter horizons — especially those nearing retirement — can consider partaking in the flight to safety and lowering their exposure to higher-risk, higher-volatility stocks in favor of lower-risk, lower-volatility assets.

That could involve a combination of near-zero risk Treasury bonds, certificates of deposit, and equal weight or income-generating exchange-traded funds.

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