For eight solid years, investors have watched a very well pronounced phenomenon take hold every time the nation endured another tragic mass shooting.
Defying logic on one hand, all the while adhering to logic on another level, shares of gun manufacturers like Smith & Wesson — now trading under the name American Outdoor Brands Corp. (NASDAQ: AOBC) — jumped on every trading session following a highly publicized gun-related massacre.
It defied logic for the average layman, whose assumption was that gun-related murder would turn people off to all things pertaining to firearms, and it adhered to logic for investors, who understood that more gun violence would spur more political discourse on the topic of gun control and, in turn, spur more gun owners and prospective gun owners to flock to the stores to stock up on new weapons while the getting was still good.
No Obama… No Hillary… No Manic Buying
At a time when the federal government was dominated by traditionally gun-fearing Democrats, any and every gunshot-riddled story to cross the newswires seemed like it was pushing the nation closer and closer to gun prohibition.
With the election of Donald Trump, however, that paradigm has clearly shifted.
Last Friday, a 26-year-old Army veteran armed with a 9mm semi-automatic opened fire at the Delta Airlines baggage claim in Fort Lauderdale International Airport, hitting 11 people — five of them fatally.
Less than 20 hours prior to the incident, I’d walked through that same exact terminal on my way back to Baltimore from a five-day vacation in Miami.
Three days later, when trading resumed on Monday morning, the usual spike for gun-maker stocks was nowhere to be seen.
Though hardly the first shooting since Trump’s election (eight people were shot in Chicago on New Year’s weekend alone), this was definitely the first to fit the “mass-shooting-by-lone-gunman” variety that the media seems to love so much.
People May Be Talking, But Fewer Are Listening
On any usual trading day of the Obama administration, this event would have pumped gun stocks at least several percentage points, but this time, thanks to an incoming Republican, all we saw was business as usual.
With the fear of gun prohibition all but gone, the fear-driven buying spurts are also going out of fashion… for now at least.
So where does this leave investors who have used this morbid species of headline to push along their shares and provide liquidity moments?
It leaves them looking for new strategies, and I, for one, welcome the change.
For stocks to operate efficiently, momentary news coverage, no matter how dramatic, should never play a substantive role.
Hopefully the sanity that the presence of a pro-gun president in the Oval Office will inject into this ongoing controversy lasts beyond the incoming administration.
Until next time,
John Peterson
Pro Trader Today