You Should Be Watching Cannabis, Gun, And Prison Stocks This Election Week


Investors are hoping for a decisive result on Election Day and bracing for volatility and uncertainty in the event that the winner isn’t clear on Tuesday evening, but movement in these sin stocks gives some insight into the outcome markets are anticipating.  

Key Facts

Shares of firearm manufacturer Smith & Wesson rose 1.6% on Tuesday and are up more than 17% year to date, while shares of Vista Outdoor, parent to a number of ammunition companies, climbed 1.6% on Tuesday and is up 21% for the year.   

Shares of gun stocks like these are rising as investors look ahead towards the stricter firearm restrictions that they anticipate will follow a win for former vice president Joe Biden win or a Democratic Senate takeover, as well as the potential for civil unrest in the event of a contested election result.

Shares of cannabis companies are also on the rise, with Trulieve Cannabis Corp. up 24% year to date and the AdvisorShares Pure Cannabis ETF up 1.8% on Tuesday and 12% for the year. 

Cannabis shares are up for similar reasons: investors are looking ahead to favorable policies for cannabis and the prospect of legalization in several states. 

Shares of CoreCivic and GEO Group—two major private prison companies in the United States—are down 57% and 41% for the year, respectively. 

Stocks like those soared after President Trump was elected in 2016, but now they’re falling as investors anticipate Biden’s campaign promise to do away with private prisons. 

Crucial Quote

“If a Biden-Harris ticket wins that [sic.] there would be more gun laws, and gun legislation enacted, “ one Indiana gun shop CEO told WTHI of the recent surge in purchases of guns and ammunition. “So, [a customer’s] concern would be that they would want to get stuff before, while it would still be grandfathered before they pass these laws.”

Key Background

The broader market started the week on a high note after the Dow Jones Industrial Average fell 1,800 points last week. It will likely be highly reactive to any uncertainty related to the election’s outcome over the next few days, especially in the event that there is no clear winner or the results are contested. According to Goldman Sachs analysts, there’s one scenario where the market could have a clear view of who the winner is on Tuesday night: if Biden wins one of four key Sun Belt states (Arizona, Florida, Georgia, or North Carolina). 

Further Reading 

Gun and ammunition sales are skyrocketing due to two factors (WTHI)

Panic At The Gun Shop: Coronavirus Fears Cause A Run On Ammo And Firearms (Forbes)

Dow Rallies 550 Points As Investors Look Forward To Election Clarity (Forbes)

Goldman Sachs Says Election Winner Could Be Obvious Tonight—Here’s How (Forbes)

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