What typically causes a correction in a bull market?

In a bull market, a correction often occurs due to prudent investors taking profits. As prices rise, some investors may choose to sell their holdings to realize gains, especially if they believe that the stock prices have reached a short-term peak. This profit-taking can create downward pressure on stock prices, leading to a correction. Investors might have varying strategies, but realizing profits is a common practice, especially for those who adopt a more cautious approach as a market becomes overextended or shows signs of overvaluation.

Increased market speculation could potentially lead to volatility and heightened price swings, but it does not inherently cause a correction. Similarly, significant political instability tends to impact investor confidence more severely and could lead to broader market sell-offs rather than just corrections in a bull market. High corporate earnings announcements generally support upward price momentum, as strong earnings can encourage further investment rather than prompt a correction. Thus, profit-taking is the most plausible reason for corrections within the context of a bull market environment.