Bellwether

Reviewed by Apoorva | Updated on Aug 26, 2020

Introduction

Performance of certain companies, stocks, and bonds are considered to indicate the condition of the economy and financial markets because their performance is well-correlated with a trend. In this context, a bellwether is an event or indicator that shows the possible presence of a trend. Bellwether companies are the market leaders in their respective sectors and are known as blue chips. The term bellwether is a combination of ""bell"" and ""wether.""

Understanding Bellwether

A bellwether stock is used to measure the performance of the market or macro-economy. The bellwether stock's status may change over time. In the case of the equities market, the well-established companies in an industry are considered as the bellwethers. Some have also been resistant to economic downturns.