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A bellwether stock is a stock that is generally viewed an an indicator of overall market or sector direction. IBM, for instance, is a bellwether stock in the computer sector while Intel is a bellwether stock in the chip sector. A bellwether stock is considered a market trendsetter. Since a bellwether stock is widely perceived as an indicator of market direction, when a bellwether stock in any sector slips, the entire sector may see an overall drop in prices. Conversely, when a bellwether stock goes up in price, an entire sector may ride up on its coattails. Bellwether stocks are generally considered to be blue chip stocks and are typically heavily-traded. The largest bellwether stocks (i.e. Wal-Mart, GE, etc.) are viewed by some investors as a gauge for the entire economy / market. |
