Bellwether or leading stocks are respected blue chip stocks that control a large chunk of the market and can be indicators of future events. General Motors and Intel are examples of bellwether stocks that influence the market and economy. The term originates from a sheep that leads the flock using a bell.
A leading stock is a stock that tends to lead the sector it is in, along with the market as a whole. In some parts of the world, these stocks are known as “barometer stocks.” Bellwether stocks tend to be respected blue chip stocks that control a large chunk of the market, and stock market analysts tend to keep a close eye on them as they can be indicators of events to come. By keeping up with common stocks, people can make stronger investments based on historical market trends.
The term “bellwether” originates from the Middle English word bellewether, which refers to a sheep that leads the rest of the flock, using a bell to attract the attention of the other sheep. Traditionally, the lead ewe was a wet or castrated ram. Over time, people began to use the term more generally to refer to any type of leader or indicator. It may interest you to know that in a flock of bell-wearing animals, the bells are often tuned together so that the sound of the moving flock is pleasing to the ear.
A classic example of an innovative action is General Motors in the United States. This action acts as a benchmark for the automotive industry, but also influences other markets, due to the position it has. General Motors buys from a large number of suppliers in a variety of industries, for example, so when the company runs into financial trouble, it has a ripple effect.
In turn, General Motors sells to private consumers, other companies, cities, fleets, etc., which means that fluctuations among these buyers can also influence the success of the company. Oil prices, for example, could lead to a reduction in the number of General Motors vehicles produced, which in turn would affect the company’s suppliers, pushing the market into a recession. Therefore, fluctuations in the General Motors stock price could indicate future financial trends.
Another well-known stock is Intel, a major player in the technology sector. Intel is also considered a blue-chip stock, which means it is a reliable and solid investment opportunity with the potential for high returns. Some market analysts may be heard to say “as goes (the stock market), so goes the nation,” referring to the enormous influence these companies have on economic health. Others say that “what’s good for (the bellwether population) is good for the country.”
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