On Sunday, at least 50 people were killed and hundreds more were wounded at the Mandalay Bay Hotel in Las Vegas. It is being described as the deadliest mass shooting in the nation’s history, and the tragedy is creating a ripple effect in the U.S. stock market.
To kick off the trading week, casino and hotel stocks are tumbling, while shares of gunmakers are rallying. Fear is what is driving Monday’s trade: worries over declining business at casinos and resorts and concerns regarding greater gun control laws at the federal and state level.
Millions of tourists swarm Las Vegas casinos every year, while millions of guns are sold annually.
Gun Stocks Up, Casino Stocks Down
A plethora of gun stocks are experiencing new highs throughout Monday’s trading session.
Formerly known as the Smith & Wesson Holding Corporation, American Outdoor Brands Corporation, a manufacturer of firearms, jumped 3.7% to $15.81 a share. Vista Outdoor, a designer and developer of ammunition and guns, rose 3% to a six-week high of $23.56 per share. Sturm Ruger & Company Inc climbed 4% to $53.75. Olin Corporation, a producer and distributor of chemical products and ammunition, swelled roughly 7% to close to $37, an all-time high.
ETFs (exchange-traded fund) holding gun stocks – there is yet to be a sole gun ETF – have also benefited. ETFs iShares U.S. Aerospace & Defense ETF (ITA), iShares Core S&P Small-Cap ETF (IJR) and
WisdomTree SmallCap Dividend Fund (DES) have posted a 1% gain.
These stocks have been cratering since the 2016 election. Sturm Ruger shares plummeted about 20% since November, while Vista Outdoor has plunged as much as 40%.
Wall Street analysts have upgraded many of these firms to a Buy rating, but they have noted that there is a lack of urgency when it comes to acquiring guns and ammo. Unlike the previous administration, President Donald Trump has not vilified the Second Amendment and has yet to call for more gun control laws.
Casino stocks, meanwhile, have taken a beating on Monday.
MGM Resorts International, the owner of the Mandalay Bay hotel, has slipped as much as 6% and is trading just under $31 a share.
The company issued a statement, confirming that it had locked down hotels in the area and is offering its deepest condolences. MGM said in a tweet:
“Our thoughts and prayers are with the victims of last night’s tragic events. We’re grateful for the immediate actions of our first responders.”
MGM China Holdings announced that it would postpone the opening of its new casino in Macau to sometime early next year because of the damage stemming from Typhoon Hato in August. For the most part, casino stocks post modest gains around the time of launches.
Other casino and hotel stocks, including Melco Resorts & Entertainment Ltd, Wynn Resorts Ltd and Las Vegas Sands Corp, have pared their early losses. These stocks were down as much as 2% in early morning trading.
Why Are Gun Stocks Soaring?
In the aftermath of mass shootings, gun stocks usually receive a bump in share price, whether it is the devastating Sandy Hook massacre or the San Bernardino attack. This is because of what usually follows: calls for greater gun control.
When politicians demand more laws and restrictions, gun advocates and enthusiasts will purchase more weapons and ammunition, helping gun manufacturers experience an uptick in sales.
Simply put: consumers will buy as many guns and ammo as possible before they’re outlawed or restricted.
A good example of this was during President Barack Obama’s time in office. The president and Democrats repeatedly pleaded and proposed legislation to rein in weapons. Anxious that there would be limited access or downright bans to firearms, handgun sales spiked 287%, shotgun sales soared 166% and rifle sales rose 160%.
Shares of gunmakers also dramatically increased in the Obama years. American Outdoor Brands experienced an 800% meteoric rise in share price between November 2008 and January 2016 – compare this to Apple’s 550% boost or Google’s 330% bump.
Gun shares may not be as bullish in a Trump administration, but they could remain a safe play for investors in the coming years. President Trump has capitulated to the Democrats before, and it is quite possible that the president could concede to Representative Nancy Pelosi (D-CA) and Senator Chuck Schumer (D-NY) once again.
And this may not be good for the Second Amendment, but it could be good for gun stocks.
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