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The ‘Defund the Police’ Crusade Could Supercharge These Stocks

Last Updated September 23, 2020 1:59 PM
Mark Emem
Last Updated September 23, 2020 1:59 PM
  • Protesters who say law enforcement agencies are marred by systemic racism are calling for the defunding of police departments.
  • Gun stock prices had already surged since the George Floyd protests began.
  • Will the “defund the police” movement keep that rally going?

As the George Floyd protests continue to rage, some activists say that calls for reform are no longer enough. They say there’s only one way to fight systemic racism in law enforcement: defund the police.

Over the weekend, the Minneapolis City Council went beyond proposing and pledged to dismantle the local police department .

Supporters of the “defund the police” movement want to siphon funds away from law enforcement budgets  and reinvest them in social services. But some citizens fear the upshot is that they’ll have to rely more on themselves to protect their lives and property.

defund the police
Would defunding the police mean individuals will bear more responsibility for their own protection? Critics say so.  | Source: Twitter 

Defund the police, boost gun stocks?

They might not say it out loud, but one group of people who may be secretly cheering the defund the police movement are investors whose portfolios contain gun stocks.

If the civil unrest witnessed in the last few weeks has been a catalyst for firearm sales, growing calls for defunding police departments could be an even bigger boon for gun manufacturers over the long term.

Since late May, when protests over the killing of George Floyd while in police custody broke out, gun companies have been some of the top performers in the stock market.

Smith & Wesson (NASDAQ: SWBI) – which was rebranded from American Outdoor Brands  earlier this month – has surged by 34% since May 27.

Smith and Wesson stock price
Smith & Wesson stock has surged since late May. | Source: TradingView 

Sportsman’s Warehouse (NASDAQ: SPWH) and Vista Outdoor (NYSE: VSTO) are both up more than 20% over the same period.

The surge in gun stock valuations has coincided with rising firearm and ammunition sales. In May, the FBI’s National Instant Criminal Background Check System (NICS) reported a 32% year-over-year increase in firearm checks .

gun stocks
Gun background checks conducted by the FBI soared year-over-year in May. | Source: FBI 

NICS is a reliable source of gun sales estimates, though it doesn’t account for many private transactions.

Consequences of “defund the police”

What occurs when law enforcement officers go on strike is the closest example of what might happen when police departments are defunded.

In different parts of the world, police strikes have often led to a spike in crime. That’s what happened in October 1969 during Montreal’s “night of terror.” 

Montreal’s ‘Night of Terror’

Montreal native Steven Pinker, who was a teenager then, wrote in his book “The Blank Slate” that six banks were robbed  during the 16-hour period when the city’s police officers and firefighters were on strike.

Pinker wrote:

By the end of the day, six banks had been robbed, a hundred shops had been looted, twelve fires had been set, forty carloads of storefront glass had been broken, and three million dollars in property damage had been inflicted…

This was a dramatic increase as the city had recorded just 51 bank robberies in the first six months of 1969 .

Rival taxi companies took advantage of the vacuum to take the law into their owns hands to sort out a dispute, leading to chaos and one death. There were also reports of widespread looting, burglaries, and damage to property.

A police strike in Brazil saw the murder rate double

Eight years ago, a police strike in the northeastern Brazilian state of Bahia sent crime rates soaring.

In the state capital Salvador, official figures indicated that the murder rate had exploded by 129%  less than a week after the strike began.

Elite police units and armed soldiers restored order in the end.

‘Defund the police’ could keep the gun stock rally alive

With U.S. citizens boasting a constitutional right to bear arms, the campaign to defund the police should unquestionably lead to more firearm sales if it keeps gaining steam.

Assuming other local governments follow the Minneapolis City Council’s lead, expect the gun stock rally to continue for the foreseeable future.

Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com. Unless otherwise noted, the author has no position in any of the stocks mentioned.