Gun Stocks Drop as Trump Wins
Donald Trump’s election has shocked and surprised the markets. If the simple fact that Trump won wasn’t enough of a surprise—or shock—the markets hit a new high, when just about every pundit had feared a crash. But not all stocks went up. Green tech stocks suffered, and that was predictable. What defied logic, however, was that gun stocks fell sharply, too.
The stock market was hoping for a Hillary Clinton win, focusing on a boom in sales of firearms before her inauguration. However, now that Trump—who was endorsed by the National Rifle Association (NRA)—has won the election, gun manufacturers face fewer risks. Investors think it’s pointless to invest now, because nobody will be rushing out to buy a gun. With Trump in charge, they have at least four years in which to do so. (Source: “Gun Stocks Take A Huge Hit After Donald Trump’s Surprise Win,” The Huffington Post, November 9, 2016.)
Trump has literally disarmed Wall Street. Apart from the bullish defense stocks, Wall Street has lost some firepower this week. Those in the know might have expected it. Stocks such as Smith & Wesson Holding Corp (NASDAQ:SWHC) lost about 24% of their value since Trump won on November 8. However, every time that President Barack Obama threatened to impose stricter gun laws—or merely enforced the current laws, in some cases—firearms stocks gained value. SWHC more than quadrupled during the two consecutive Obama administrations.
The next resident of the White House has championed the second amendment to the U.S. Constitution. This allows any American to own any number of rifles and pistols and store them at home. During the election campaign, Trump used every chance to stress this position. Trump even went as far as suggesting that he would further liberalize gun laws.
Perhaps Smith & Wesson is more surprised than anyone. It announced a plan to change its name to American Outdoor Brands on the day before the election. Possibly fearing a Hillary Clinton win, the company decided to emphasize its outdoor and lifestyle items (knives anyone?), downplaying the firearms component.
Mahatma Gandhi or Nelson Mandela could not have done any more harm to gun stocks. Had Clinton won, as the market’s logic suggests, many Americans would have rushed to buy guns ahead of possible new restrictions or outright bans. However, during the campaign, Donald was crystal-clear about his stance on gun laws. One of his claims was that Hillary wanted to take away people’s guns.