Obama’s Action on Gun Control Reveals an Unsettling Sales Trend

Joel Anderson |

Prior to President Obama’s address on Tuesday about his executive order to enact gun control, it was a red letter day for gun companies. Gun stocks were up sharply, recognizing the classic pattern of spiking sales ahead of the enactment of new laws.

Smith & Wesson and Others Shooting Upward

It has long been a perverse truth that nothing sparks gun sales like a national tragedy. In the aftermath of the Sandy Hook shooting, concerns about a nationwide ban on assault rifles prompted sales of the AR15 to shoot through the roof. What’s more, the presence of Barack Obama in the executive office has long had gun lovers concerned about the future.

Well, news broke today that Obama will be taking executive action on gun control, including a widely-reported expectation that this would mean an expansion of background checks. The result? Market watchers were clearly anticipating a spike in gun sales in the near future, as major gun stocks are on the rise.

Smith & Wesson (SWHC) saw shares spike some 5.91% and continued to surge in early after hours trading with gains in excess of 6.5% prior to Obama’s speech. Sturm, Ruger & Co. (RGR) was also on the rise, though not by as much. The company marked a 3.05% gain on the day. Finally, Olin Corporation (OLN), a chemical company that owns Winchester Ammunition, was up 1.8% on the day’s trading.

Stocks Surge on Second Amendment Fears

The big gains for these companies are all the more impressive when one places them in contrast to the rest of the market. Major stock indices had their worst opening day of the year since 1932, down sharply from trading on Dec. 31st and seeing losses run as high as 2.15% before rallying to losses of 1.5% for the S&P 500 and Dow Jones Industrial Average.

So, the power of fear that President Obama is going to take away people’s guns runs deep - so deep that it not only boosted stocks significantly, but it managed to do so in the midst of one of the worst trading days in recent memory.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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