Barometer Stock

DEFINITION of 'Barometer Stock'

A security whose performance is considered to be an indicator of the performance of its particular sector or industry, or the market as a whole. Barometer stock acts as a gauge for the overall market or sector. Analysts often look to barometer stocks to predict the direction in which an industry or market is likely to be headed in the short term.

Also referred to as a bellwether stock.

BREAKING DOWN 'Barometer Stock'

Barometer stocks are usually large-cap equities or respected blue chip stocks that signal a bullish market during periods of favorable performance, and signal a bearish market during periods of unfavorable performance. Many different types of securities can be classified as barometers; however, in the United States, the shipping and rail stocks have historically proven to be good indicators for the U.S. economy and, as such, make good bellwethers. Barometer stocks can have a large influence on the economic health of the country. Market analysts sometimes say something to the effect of, "What's good for [barometer stock] is good for the country."