Gunmakers’ Stocks Surge Following the Tragic School Shooting in Uvalde, Texas

The terrible events that unfolded in Uvalde, Texas on Tuesday, May 24th, left the world shattered and heartbroken. Twenty-one people – 19 elementary school pupils and 2 teachers – tragically lost their lives in a deadly school shooting. Unfortunately, shootings in the US are neither rare nor uncommon. Just for the first five months of 2022, there have been 213 mass shootings in the US, out of which, 27 were school shootings.

The immediate aftermath of Tuesday’s massacre saw lawmakers, senators, and people of authority reopening the controversial debate on gun reform in the US. As Peter Bergen, CNN National Security Analyst writes, “Americans think of themselves as citizens of an exceptional nation; and yes, the US is exceptional. No other country is as heavily armed as the US. The closest country is Yemen – a place in the throes of a long civil war – and even then, gun ownership is less than half the US.” And yet, even with US President Joe Biden, senators, governors, and the world condemning such atrocities, the share prices of gun makers usually surge after incidents of mass shootings, and this week has been no different. Ahead of massive pleads for stricter gun laws, on Wednesday, the prices of gun-maker stocks jumped. The price of Smith & Wesson, one of the largest American firearms manufacturer, surged about 7 percent after an approximate ten-day low, with the stock trading at $14.90 at the time of writing. The last time it was trading above $14 was mid-May when another mass shooting took the lives of ten people inside a supermarket. Similar increases have been observed for other American gunmakers; for instance, the stock price for the American firearm manufacturing company Sturm, Ruger & Company jumped around 4 percent, trading at $66.26 at market close (and at $67.49 in after-hours trading).

The stock market reaction may be troubling and callous, but this is the norm in the US; fear of gun control spikes interest in gun ownership. “The gun industry has perverse incentives,” Dru Stevenson says, a professor at South Texas College of Law in Houston, “because sales and their stocks go up when there are events like this.” Likewise, a leap in the stock price has also been noted since President Biden’s election, because usually, under a Democratic administration, discussions on tougher gun control measures resurface and gain traction. Overall, when Americans worry that stricter gun control legislation will pass through – which will make it harder for them to purchase weapons, – they tend to stock up on firearms and ammunition.

All of these happened when the rest of the world heavily criticised and voiced their revulsion these past days at the inability of the US to effectively tackle gun violence. “We are a very pragmatic people. When we saw something like that happen, everyone said, ‘Never again,’” New Zealand’s Prime Minister, Jacinda Adern, commented regarding the worst mass shooting in their country’s history in 2019 when fifty-one people were killed at two mosques. Following the incident, New Zealand immediately banned semi-automatic and assault rifles. Similarly, Australian Treasurer, Jim Chalmers, told reporters: “It is hard to imagine that a great country like the United States can go on like this, with this gun violence, these mass atrocities,”. Australia did go on the offensive when a mass shooting in 1996 took the lives of 35 people, after which it also quickly banned semi-automatic shotguns and rifles. Number of mass shootings in Australia since 1996? Zero!

Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.

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