In the wake of the Las Vegas mass shooting, gun manufacturers are facing harsh criticisms. However, their stock prices are defying expectations by increasing in value. The stock prices of American Outdoor Brands, formerly Smith & Wesson, and competitor Sturm Ruger & Co rose after the shooting.
Headlines of gun investors profiting from this tragedy have understandably drawn anger around the country. However, the market reaction is the latest in a trend that’s happened after every recent major shooting.
If we follow American Outdoor Brands’ stock movement over the past several years, we see the 2016 Pulse nightclub shooting in Orlando and 2015 San Bernardino shootings caused stock increases of 12 and 23 percent respectively.
At first glance, stock movement like this sounds counterintuitive, but fear can be a powerful market force, and fear of stricter gun regulation is to blame for price movements.
After mass shootings, discussions of gun control policies obviously receive more attention, inflating demand of firearm purchases due to fear of limited availability. Many gun owners feel if gun regulations are put into place, they only have a limited time to purchase firearms before they are illegal. In fact, mass shootings don’t have to occur to see this fear effect in the market.
During former President Barack Obama’s presidential campaign and terms, the National Rifle Association (NRA) painted him as “the most anti-gun candidate ever” and warned an Obama administration would restrict many gun ownership rights. Despite gun freedoms expanding under Obama, the NRA was successful in shaping gun owners’ views of the President.
As a result, American Outdoor Brands saw a stock price gain of 800 percent between November 2008 and January 2016, far outpacing companies such as Apple. Conversely, since the Trump Administration took over, stock prices of gun manufacturers have seen declines in market price.
However, how accurate are investors in predicting surging gun sales? While there is no comprehensive monitoring of firearm sales in the U.S., we can use the FBI National Instant Criminal Background Check System as a proxy for gun sales since criminal background checks became required when purchasing a gun in 1998.
A 2016 Bloomberg article found after each mass shooting from the 1999 Columbine massacre to the 2016 Pulse shooting, background checks skyrocketed from their seasonally adjusted averages.
A separate 2017 study published by the Annals of Internal Medicine researched the effects the Sandy Hook and San Bernardino shootings had on handgun sales in the state of California. The six weeks following each shooting saw increases in handguns sales of 53 and 41 percent respectively.
Others may chalk up the increase in gun sales to an increase in people wanting to defend themselves. However, by looking at the background checks there is a noticeable spike when states implement stricter gun control policies such as in Maryland and New Jersey in 2013.
Even surrounding states in the southeast saw a significant bump in firearms sales in 2005 when police began confiscating weapons after Hurricane Katrina.
The 2017 study by the Annals of Internal Medicine also found in their study that people with no record of previously owning a handgun did not see a significant increase in handgun purchases.
All of this suggests hoarding of firearms in preparation for increased gun control legislation accounts for a considerable increase in firearm sales in the wake of mass shootings.
The rise of gun manufacturer stock prices has become a counterintuitive staple of our nation’s response to these types of tragedies and gives interesting insight to how political fears can shape the markets.
Jay Cranford is a 23-year-old finance senior from St. Simons Island, Georgia.