Marijuana Forecast for 2020: Pot Still Has Potential to Maximize Your Investment

Marijuana Forecast for 2020Marijuana Forecast for 2020

Over the past few years, we’ve seen pot companies expand into countries around the world. Headway is being made into many of the most lucrative markets on Earth, including Europe and the United States.

And, of course, we still have Canada, which was the first major economy to legalize marijuana within its borders.

In 2020 (or soon thereafter), we may see legalization extend to the Holy Grail of the marijuana market: the United States. America is as close as it has ever been to federal marijuana legalization; we could see some major progress on that front this year.

2020 Presidential Election

For years now, the majority of Americans have supported pot legalization in poll after poll. The social pressure is certainly mounting.

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But the U.S. has waged a long and costly War on Drugs that many holdouts—specifically older politicians—are looking to continue. For that reason, the U.S. has yet to adopt any sort of meaningful country-wide legislation concerning marijuana. The few bills that have been put before Congress have experienced swift deaths.

That could all change with the 2020 presidential election.

You’re going to be hearing a lot about the election this year, with the news cycle in 2020 likely to be dominated by the race. But you might not hear much that this election could redefine the marijuana market for the next decade.

The Democratic Party has come out largely in favor of marijuana legalization. Most of the front runners in the race to be the Democrats’ presidential candidate have voiced support for legalization—or at least decriminalization.

That’s great news for the marijuana industry, even if there are a few caveats, the first being that politicians aren’t exactly known for keeping all their promises post-election. The second caveat is that, at the time of this writing, the only true vocal supporter of pot legalization among the Democratic presidential candidates has been Bernie Sanders.

Not to mention that the U.S. president is not a king, and an oppositional Congress could impede marijuana legalization. Still, this is far and away the most that a major U.S. political party has ever openly backed pot reform.

One major thing to watch when it comes to marijuana stocks in 2020 is which candidate surges ahead in the primaries and then in the general election race. If any of the pro-pot presidential candidates are on their way to the White House in 2021, then marijuana stocks will likely surge immensely on the anticipation of federal legalization.

On top of that surge, investors will likely be greeted by another big gain when the legislation is introduced (and then, of course, when it’s enacted), leading to massive gains similar to those experienced in Canada when that country went through a similar process.

Crackdown on the Black Market

And now on to the second major factor affecting the marijuana sector in 2020: the black market. The illegal market, even where pot legalization is present, continues to make up the bulk of marijuana sales.

An audit by the United Cannabis Business Association found about 2,835 unlicensed weed dispensaries and delivery services in California, compared to 873 licensed sellers in the state. (Source: “Nearly 3,000 illegal marijuana businesses found in California audit, dwarfing legal trade,” Los Angeles Times, September 11, 2019.)

It’s worth mentioning that California is the largest marijuana market in the world right now, outpacing Canada.

As you’d expect, that massive disparity in availability has played itself out in a glaring revenue deficit. Another industry-backed audit estimated that about $8.7 billion would be spent on unregulated cannabis in California in 2019, compared to $3.1 billion spent on legal marijuana in the state.

So, what we’re actually waiting for is a second stage of pot legalization: the crackdown on the illicit market.

Right now, with legalization in full effect in 11 states, D.C., and Canada, there is less pressure on law enforcement to bring down illegal marijuana operations. Couple that with the fact that illicit dealers don’t need to pay taxes or licensing fees and you have a massive competitive advantage for illegal sellers.

Considering that lifelong marijuana users trust the black market (after all, they’ve been in business for decades)—and that the illegal market offers significantly discounted prices—it makes sense that many consumers would stick to their old ways.

That could all change in 2020.

Not only have we seen certain black-market products (such as vapes) produce negative health outcomes, but governments are beginning to understand that they need to do more to debilitate the illegal market.

Whether it’s by reducing licensing fees and taxation on legal marijuana businesses, turning the heat up on black-market operators, or offering incentives to legal companies, there are effective tools that can be used to help transition black-market profits into the legal market.

And then you have the fact that the black market is going to be weakened over time through attrition. Case in point: Ontario, which is Canada’s largest and richest province, is finally allowing additional legal storefronts (a move that was long overdue).

As it becomes more convenient and cheaper for consumers to buy from the legal market, many users will migrate away from the black market.

I anticipate that we’ll see a huge step forward in this regard in 2020. As such, marijuana companies will begin to see a steady and significant boost in profits as they battle the black market, which in turn will boost the prices of marijuana stocks.

Analyst Take

The marijuana stock market has experienced a downturn, yes. But this happens in industries as volatile as pot. The important thing to remember is that the marijuana forecast for 2020 looks incredibly bright for both current and future pot stocks.

With federal legalization fast approaching in the U.S., potentially coming as early as next year, marijuana stocks are primed to see another explosion in value in the near future.

Furthermore, the fight against the black market is going to begin turning in the legal market’s favor over time. That will likely bring a huge inflow of cash to the marijuana sector, boosting share value.

What that all means is that 2020 will hardly see the end of pot stocks’ ability to grow. In fact, I’d argue that they’re just as full of potential now as in any other time in their history.