The layperson intuition is obviously, “People rush to buy guns when they think a ban is imminent, and so the higher sales are good for Smith & Wesson stocks.”
However, does that make sense? Shouldn’t today’s stock prices reflect the long run?
(For example, nobody would expect coal stocks to rise after an Obama victory, even though there might be a small effect of people buying electricity ahead of new EPA rules and a consequent price hike in energy.)
One way to make sense of this outcome is that even over the long term, people are going to buy more total guns if they think the federal government is going to try to ban them. In other words, the prospect of an Obama ban didn’t merely “pull sales forward,” but it created sales that otherwise would never have existed.
Is this the only plausible mechanism? Because in general, it seems weird that investors might secretly hope for the government to outlaw their product. We didn’t see this in the tobacco industry, right? If not, why the difference? (I am not merely asking rhetorically; I can think of some relevant differences, which might be driving the results. But I open the floor to discussion.)