Another Huge Opportunity for Marijuana Stocks Is in Development
U.S. Marijuana Legalization Possibilities
I was hopeful earlier in 2020 (who wasn’t?) that this would be the year we see major progress being made on federal U.S. marijuana legalization. A lot of that hope was predicated on the, at the time, crowded race for Democratic Party presidential nominee.
With that race being won by a 77-year-old centrist, it looked quickly like the hopes for a pro-legalization candidate winning the White House in November were dashed. But that may be changing, and with that change we could see huge gains from marijuana stocks.
So let’s first understand what’s at stake here.
Federal U.S. marijuana legalization is, and will continue to remain, the event horizon for the marijuana industry. What I mean is that, when legalization begins to gain serious momentum and goes from possibility to certainty, share prices will soar exponentially.
After all, the stock market has been slavering over this possibility for years now. All that anticipation is building toward what I anticipate will be the single biggest growth period for the pot industry. And that’s saying something, considering how fast the industry has already grown.
The size of the U.S. marijuana market is, well, massive. We’re talking billions of dollars in potential revenue.
Some estimates have the global marijuana market size being around $73.6 billion by 2027, with the U.S. being a large chunk of that market (consider that California is already the largest legal marijuana market on Earth). (Source: “Legal Marijuana Market Size Worth $73.6 Billion By 2027 | CAGR 18.1%,” Grand View Research, last accesses July 10, 2020.)
Another forecast is that the coronavirus economic downturn, while troublesome for the growth of the marijuana industry in the short term, may actually end up being a boon in the long run.
That’s because we often see consumption of vice goods like alcohol go up during tough economic times. Consider that, during the financial collapse of 2008, alcohol sales climbed despite the rapid drop in both stock market value and personal wealth in the United States. (Source: “Alcohol Sales Thrive in Hard Times,” CNN Money, June 9, 2011.)
We can expect to see the same from marijuana products. That, of course, would help marijuana stocks see a fair bit of gains in the coming months and years (depending on how long the economic fallout from COVID-19 is).
In any case, the coronavirus is not necessarily a bad thing for pot revenue. We’ve already seen a healthy uptick in marijuana stock gains over the past three months.
Chart courtesy of StockCharts.com
And, of course, we have the possibility of marijuana being used as pain medication in the near future.
That’s another development that would be helped along by U.S. marijuana legalization, or at the very least decriminalization and removal of designation as a Schedule I narcotic (which prevents research into the possible medicinal effects of pot).
Schedule I drugs (which include heroin) are designated as such because they are believed to have no medicinal value whatsoever. We know that’s not true of pot, but its Schedule I designation is a latent problem of the multi-decade war on drugs that the U.S. has waged.
Therefore, if U.S. marijuana legalization or decriminalization comes about in the near future, we could see some massive opportunities open up for investors in marijuana stocks.
Considering that our current pain medications (like opioids) are considered to be highly addictive and deleterious to one’s health, a substitute with relatively little chance for abuse would be a welcome solution.
This is a very likely scenario, should we see a pro-marijuana president assume power in 2021.
And that’s what makes this year ripe with opportunity.
Pot Stocks Benefit From U.S. Election
Early on, hopes were high that a candidate like Bernie Sanders would assume power in 2021, allowing for a swift introduction of federal U.S. marijuana legalization by way of executive orders.
That dream is gone, of course, and instead the least pro-pot politician in the field of Democratic Party candidates has become the party’s presumptive presidential nominee. Whatever your politics may be, it’s hardly a strong outcome for marijuana stocks.
But all hope is not lost; there are a couple bright spots.
I’ve written about how it’s looking more and more like Joe Biden will choose Kamala Harris as his running mate, and why that will be very good news for pot stocks.
Harris hasn’t traditionally been an ally of the marijuana industry (in the past, she’s been arguably a staunch opponent of pro-pot agendas among Democrats). Still, she’s since evolved on the issue and is now an advocate for weed legalization.
If Harris becomes vice president, I doubt she’ll push for pot legalization, but that could change if she becomes president later (Biden is, after all, 77 and claims to be only running for one term). And even then, there’s the hope that Harris would be able to influence Biden somewhat on pot policy, which could, at the very least, lead to decriminalization.
And, frankly, that’s a likely scenario.
There’s a better-than-zero-percent chance we see Biden do half-measures regarding U.S. marijuana legalization. Half-measures would still be better than nothing (or the outright contempt that the current administration has toward the marijuana industry).
Biden holds the trite “we need more research” position that is, in effect, a punt, but there’s hope that this research entails, you know, actual research. That would mean removing the drug from its Schedule I classification in order to open up examination of the drug’s possible beneficial effects.
All of the scenarios above would result in massive gains for pot stocks, and they’re all possible.
But we’re also beginning to see some pressure to make U.S. marijuana legalization a part of Biden’s policy offerings.
The Atlantic, a Democrat-leaning (arguably) political magazine, recently published an article describing how it would be politically expedient for Biden to support marijuana legalization, if for no other reason than because it’s widely popular in America. (Source: “The Marijuana Superweapon Biden Refuses to Use,” The Atlantic, July 6, 2020.)
I anticipate that we’ll see more and more of these nudges from Democrats, centrists, libertarians, and other wings of the U.S. political spectrum all keen on seeing U.S. marijuana legalization come about sooner rather than later.
And Biden, if nothing else, appears to be pliable in his positions as of late.
Which is all a long way of saying that political hope for U.S. marijuana legalization in 2021 isn’t yet dead. And if it were to come about, we could expect to see pot stocks surge exponentially, making now a great time for investors to consider them on the dip.
I anticipate that U.S. marijuana legalization will happen regardless of who’s the head honcho in Washington; it’s just a matter of time. By the end of the decade, I predict that Americans will be fed up with politicians not listening to what the vast majority of the people are saying on this issue (not to mention that many of the older guard in both parties who politically matured in the age of anti-drug policy will leave politics in the coming years due to age).
As such, the outlook for federal U.S. marijuana legalization could be radically accelerated in a best-case scenario.
The only major obstacle here is how long coronavirus lasts. And by “lasts” I mean consumes media attention. Between the virus and the presidential race, people aren’t talking about much else right now. Marijuana legalization, unfortunately, has been cast aside in this media environment.
That will eventually change, and if pot legalization does end up playing a part in the presidential race, it may rise again to prominence as a topic of discussion. Meanwhile, COVID-19, while perhaps not hurting the revenues of cannabis companies, is definitely stealing the media spotlight.
There’s little doubt in my mind concerning the future of marijuana stocks.
They were already on the way up before the COVID-19 crisis (with a few hiccups, both major and minor, along the way), but the potential in this industry is undeniable. There are literally millions of consumers just waiting for their country to legalize pot so they can spend their leisure time enjoying a puff legally, instead of committing a minor crime (and in some countries, a major one).
Not to mention that taxes on legal marijuana sales will help replenish state coffers after the coronavirus did a number on pretty much every country’s deficit. Putting the economy on pause didn’t just hurt your bank account, the government’s revenue was way down as well. Not to mention that the huge dent in employment will also hit states in their wallets (or treasuries, to be more accurate).
The point being that the argument for marijuana legalization around the globe remains as strong as ever, and arguably it will be even stronger post-coronavirus.
All we need now is to see action from politicians in the coming years to help spur what could be one of the most rapid growth industries in 2020.