A period in the stock market in which it is obvious the direction the market is trending.
Details of No-Brainer
A No-Brainer market typically refers to "Strong Bull" markets or "Strong Bear" markets. Strong Bull markets reflect a growth in the economy. During this time, money is flowing; people are spending and making purchases more freely. This creates a strong stock market where all investors are making a profit.
Strong Bear markets, however, reflect quite the opposite. During this time, the stock market declines a minimum of 20% from a recent peak. For the stock market to be a Bear Market, stocks must drop a minimum of 20% but often lose as much as 30% of their value. Bear Markets tend to last quite a long time. On average, over the last 75 years, a Bear Market lasts about thirteen months. Bear markets are known for their atmosphere of pessimism and distrust on Wall Street.
In both of these markets, the trend is obvious and easy to follow. No-brainer does not refer to the increase or decrease of value in the market. Rather, that the market trends are so obvious, it should take no thought to follow.
Example of a No-Brainer Market
Jason is a stockbroker. Jason had been a stockbroker for several years, and in past years the market had been unstable. He had seen stocks rise and fall quickly, with the value changing rapidly.
However, at the beginning of the year, the stock market began to rise and stabilize. Jason was unsure whether to invest in risky portfolios because his experience showed a market in upheaval. Still, after several months, the market remained high. Spending in the United States had increased and remained at a higher rate than in the previous decade.
It was soon declared to be a strong bull market. At this point, Jason was confident in his previous investments. He now knew it was safe to make risky investments with the opportunity for higher returns. He felt that if he didn't put his money into investments with the opportunity for a larger turnaround, he would be missing an opportunity.
Jason began making many investments, most of those into more risky portfolios without thought. He knew that the market was holding steady and that he would see a great return on all of his stocks, not just a few.
Significance of No-Brainer
No-Brainer is significant because it is very telling about the state of the economy. Whether the market is in upturn or downfall, both instances of a no-brainer market indicate consistency over time. When the stock market holds a trend for an extended period, it becomes easier to choose a strategy to manage your investments.
In an upturning market, investing in riskier, higher profit stocks may be a profitable move. In a down-turning market, you have the opportunity to liquidate all stocks or invest in stocks that are historically profitable for a lower rate. Investment choices become clearer and easier to make in times of stability. This applies to both strong bear and strong bull markets.