Why Investors Shouldn’t Be Too Concerned with the Current Marijuana Correction

Why Investors Shouldn't Be Too Concerned with the Current Marijuana Correction
iStock.com/Aleksandr_Kravtsov

Marijuana Correction Solution

Pot stocks are down across the board; we can’t hide from that fact. But instead of panicking, investors would be better suited to ask themselves why, exactly,  share prices are down in the first place.

The marijuana correction is happening, yes, but is it happening because pot stocks are in bad shape? Overvalued? Duds? The answer to all these questions, more or less, is “no.”

The reason we’re seeing such a huge dip is that the economy overall is seeing a dip. The trade war with China is heating up, causing concern among investors. On top of that, we’re starting to see signs that a recession may be on the way.

It’s hard for a traditionally volatile industry like the emerging pot market to weather these tumultuous times because, when investors get skittish, they often flock to safer investments in order to hedge against a potential economic downturn. Bonds, gold, blue-chip stocks: all these are traditional safe havens from recessions, and marijuana stocks simply aren’t in that category.

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The result, as we’ve seen, is an overall fall in pot stock prices this summer. Having said that, however, the fall doesn’t detract from what made marijuana stocks so exciting in the first place.

The industry itself is in no worse shape than it was a few months ago, when stock gains were aplenty. It’s simply a different set of circumstances  driving investors towards more cautious buys right now.

So, with that in mind, investors needn’t panic about the current marijuana downturn. Instead, they can view this time as an opportunity.

As with all recessions and marijuana corrections, there’s a good chance to make a profit for investors who are willing to be a little riskier with their plays—and be patient for the market to turn around.

You see, with all these share prices down as they are, this is a perfect time to gobble up valuable pot stocks at a discount, as they will more than likely bounce back in the coming months. It’s happened time and again, whenever we’ve been faced with a marijuana correction, and I see no reason why this time will be any different.

The only thing that’s new here is that there may be an overall longer decline if we enter a recession.

Having said that, the recession will not be permanent, and it’s highly unlikely that it won’t be anywhere close to as devastating as the 2008 one, so we’re likely to see not only a speedier recovery but also a more vigorous one. Therefore, right now could be a perfect time to profit off of the uncertainty in the market.

Analyst Take

Pot stocks may be down, but do not count them out. They will bounce back and we will see strong growth again in the industry before long.

Abandoning top-tier pot stocks right now in a fit of panic would likely be the wrong move for investors. Holding out and weathering the storm could be the right way to go—either that or locking in profits among the better-performing stocks and reinvesting at their peak.