Definition of Bellwether Stock
What is a "bellwether stock"? What is the definition of the term "bellwether stock"?
When it comes to the stock market, a "bellwether stock" is a company that is seen to be the leader of an industry or sector.
As a bellwether stock goes, so goes the rest of the industry or sector. That's the idea, anyways.
For instance, a company such as JP Morgan Chase is seen to be a bellwether stock in the financial sector. If JP Morgan Chase is doing well, then there is a good chance that the entire financial sector is also doing well.
On the other hand, if JP Morgan Chase is struggling, then there is a good chance that the entire financial sector is also struggling.
There are also bellwether stocks that reflect the overall strength of an economy. If these companies are doing strong business, then there is a very good chance that the economy as a whole is performing well.
If these bellwether stocks are underperforming, then there is a good chance that the economy is struggling.
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