The trajectory of the market looks to remain unclear for the foreseeable future, or at least until there is substantial federal legislation that makes investing in cannabis a more stable investment.
Cannabis stocks have been in the news after showing dramatic gains and losses over the course of just a few days. The activity started in response to the announcement that Congress will soon hold a floor vote on the Marijuana Opportunity, Reinvestment, and Expungement (MORE) Act.
With this announcement coupled with the reality that more and more states are legalizing recreational marijuana, one might wonder if now is the perfect time to invest in marijuana.
After the dip in the market Monday, however, there is a renewed understanding that maybe marijuana stocks are not a safest bet quite yet. With continued forward momentum happening in marijuana legalization every year, is now a good time to invest in weed? And if not now, then when?
First, there is the fact that more and more states are legalizing recreational marijuana. This means more marijuana businesses, and increased growth for the industry as a whole. This should mean profits stocks should increase for many cannabis companies, or at least one would think.
“It’s a big deal, but we won’t see any money from those states for a while,” Jason Spatafora, co-founder of MarijuanaStocks.com, told U.S News in reference to the recent increase in states legalizing weed. The recent legalizations will be good news for the market eventually, but these single state legalizations do not make the immediate impact on Wall Street that one might expect, especially without the backing of the federal government. This is where the MORE Act comes into play.
“Before there will be any significant institutional investment, federal legislation must pass giving the cannabis industry access to the U.S. banking system,,” according to Forbes. In short, the cannabis industry needs to be able to conduct business with banks like any other major market player, which the industry currently cannot. If the MORE Act passes, cannabis stocks might be able to attain more stability and legitimacy.
While Congress is putting the MORE Act to a vote in Congress, it is unlikely that it will swiftly become law. The vote itself appears to be more symbolic than anything.
“We expect the MORE Act to clear the House once again, but we view it primarily as a messaging bill as it has no viable path to passage through the Senate,” Barrons reported, quoting a research note from BTIG strategist Isaac Boltansky. The fact that there will be a vote means there is potential to spark up much needed debate and discourse on the matter, but it will likely fall short of the federal legislation the cannabis industry needs to achieve stronger legitimacy.
Still, just because cannabis stocks are not currently as stable as some more established industries does not mean they should be completely overlooked. In fact, some say now is a great time to get in at the ground level.
“Investors may think now is the time to get out of cannabis stocks, but those falling share prices provide an opportunity to lock in a low share price before things eventually bounce back,” according to NASDAQ.
For those confident in the future of marijuana, now might be a good time to start investing in the companies they believe in. NASDAQ’s rule of thumb? Look for the ones that are growing revenue and already making a profit.
While investing in weed is currently a bit of a gamble, its future looks very green. America’s cannabis industry is currently worth around $60 billion, and is projected to grow to upwards of $100 billion by 2030. The current stocks might not be secure, but the industry itself is on a very profitable path. The key is knowing there will be highs and lows over the next few years, and being at peace with that as an investor.
If you are investing in weed today, be cautious in your investment and be prepared for inevitable ebbs and flows. “It may come as a shock to investors who haven’t experienced extreme volatility in their portfolios before, or whose portfolios are too heavily tilted toward cannabis,” wrote NextAdvisor, in reference to the extreme highs and lows of marijuana stocks.
It looks like investing in weed will continue to be a bit of a roller coaster ride. The trajectory of the market looks to remain unclear for the foreseeable future, or at least until there is substantial federal legislation that makes investing in cannabis a more stable investment. Still, if you believe in the product or a specific company that has stock available, now may be a very cheap time to buy. Just remember that if you invest in weed today that you are playing the long game. It’s a marathon, not a sprint.