Another Great Sign for U.S. Marijuana Stocks

Alabama to Legalize Medical Marijuana

There’s been no shortage of good news for U.S. pot stocks lately. Sure, the share prices have been a little bit unpredictable, but overall, most major trends have been positive for U.S. marijuana stocks.

Another big win for the industry was the recent news about Alabama’s medical marijuana legalization. (Source: “Alabama GOP Governor Signs Medical Marijuana Bill Into Law,” CNN, May 17, 2021.)

But why is Alabama’s legalization of medical marijuana that important?

Well, it’s not—at least not as a single event. Alabama isn’t that populous or rich a state, so its material impact will be rather minimal in the grand scheme of things.

Advertisement

But what the Alabama legalization signals is worth far more for long-term marijuana investors.

The first important thing to note: Alabama is a deeply conservative state. Arguably the heart of the deep south, alongside Mississippi and Louisiana, Alabama is typically seen as one of the most anti-marijuana states, at least in the conventional way of looking at the issue.

But that dynamic has been changing. For decades, cannabis was seen as a left-right issue in American politics. Which is to say that some Democrats supported marijuana legalization in the U.S. while most (if not all) Republicans were against it.

Over the past few decades, however, we’ve seen a seismic shift in the way we talk about cannabis in the U.S.

Most Democrats (or at least, most of the party’s upper echelon) have gone on record as supporting U.S. marijuana legalization. And the issue has crossed the political divide, with many Republican politicians and voters coming around on the issue of marijuana legalization.

In Alabama, this altered political landscape is being put in clear relief. Alabama’s governor recently signed a medical marijuana legalization bill that had been passed by the state legislature. A legislature, I might add, that is roughly 75% Republican.

In other words, marijuana legalization is quickly losing its potency as a politically divisive issue and is looking more and more like an inevitability. When I say “looking” like an inevitability, that’s not quite right; it is an inevitability.

Federal U.S. marijuana legalization is bound to happen; it’s just a matter of when. While we likely won’t see any major movement at the federal level in the next few years due to the deadlocked Congress and the hyperpartisan atmosphere, there’s only so long that the U.S. can exist in this duality in which many states have legalized pot but the feds fail to respond.

So the fact that Alabama, of all places, is legalizing medical marijuana is a very good sign for the future of the drug in America.

It’s also worth examining how the drug is being legalized in that state. The legalization bill moved through the state congress without being initiated by a direct ballot initiative.

For many years, especially in the early days of pot legalization in the U.S., politicians pushed the responsibility onto the citizens, forcing referendums (direct votes) on the issue. This was seen as a way to accomplish marijuana legalization without risking political blowback.

That the Alabama legislature took it upon itself to legalize medical pot speaks to the growing acceptance of the drug across the country. In other words, the political capital expense of supporting marijuana legalization in the U.S. is fairly diminished now. In all but the most vehemently anti-pot states, being pro-legalization is more likely to gain you votes than lose any.

But what does this mean for pot stocks in the near term?

Well, not a lot. For now, marijuana stocks are going to be as unpredictable as ever—maybe even more so than usual.

Why?

In a word: COVID-19. While the pandemic hasn’t lessened pot consumption (something I predicted from the very start)—and did lead to a massive surge in marijuana stock prices after a brief collapse—it has impinged on the marijuana industry’s supply chains.

So while many people have been looking to indulge in marijuana, the pandemic has brought some structural issues that have damaged profits.

But those are temporary setbacks. As the pandemic dies out and we see the economy roar back to life (something that many economists are predicting for 2022), I imagine that pot stocks will be among the strongest gainers in the coming year or so.

That means, for investors who are willing to weather the volatility in the near term, there’s good reason to consider investing in marijuana in 2021.

Analyst Take

It’s safe to say there’s never been this much support for marijuana legalization in the U.S., at least not in modern history. We’re seeing states of all political compositions—from deep red, to deep blue, to purple—support legalization in one form or another.

That speaks to a larger overall trend of Americans supporting marijuana legalization, as seen in poll after poll.

There’s only so long that U.S. federal politics can stay stuck in the past. What’s more, older American politicians (like President Joe Biden) are being superseded by younger generations with more accepting views of pot.

Whether we see further movement on the political front, with the pandemic ending, we can expect to see the marijuana supply-chain issues of 2020 dissipate.

All this culminates in what’s likely to be a huge year for marijuana stocks.