Why Are Marijuana Stocks Doing So Well after the Election?
Before the U.S. election, President Donald Trump warned that if Joe Biden won the November election, he would plunge the country into a depression and the stock market would crash. That didn’t happen. In fact, it appears as though Wall Street is quite content with a Democrat in the White House. All three major indices had their best week since April. The S&P 500 posted its second-best post-election week in history and its best since the 1932 election. The biggest winners on Wall Street though, were U.S. cannabis stocks.
During the election five states had marijuana legalization initiatives on the ballots. They all passed. Arizona, Montana, New Jersey, and South Dakota legalized recreational adult-use. South Dakota also approved a medical initiative. Mississippi supported two medical pot initiatives.
Today, 15 states have approved recreational cannabis use while 36 states, plus Washington, D.C., have approved medical markets.
It appears other states are poised to do the same. Andrew Cuomo, governor of cash-strapped New York, said he believes pot will become legal in the Empire State in 2021. Connecticut, Maryland, Pennsylvania, and New Mexico could also legalizer recreational marijuana use in 2021.
This is a major victory for the cannabis industry. Especially publicly traded pot stocks. Right now, marijuana is still illegal on the federal level, which means cannabis companies cannot access traditional financial services, like banks. Most pot stocks have to operate as a cash-only business, which is difficult for even the most well-run companies.
With more states legalizing marijuana there will be growing pressure for the federal government to become more flexible. And there is some hope that will happen. The incoming chair of the Senate banking committee, Pennsylvania Republican Pat Toomey, has not ruled out allowing financial institutions to serve the marijuana industry. A fresh injection of liquidity should be a financial boon to all U.S. pot stocks.
Legalizing cannabis on the federal level would also help the entire U.S. marijuana industry to explode. That could happen too. On the campaign trail, Vice-President elect Kamala Harris wants to end the federal prohibition of cannabis and was the lead Senate sponsor of the Marijuana Opportunity, Reinvestment, and Expungement (MORE Act).
It won’t be all clear sailing though. The Democrats may have taken the Oval Office and House of Representatives, but Republicans still control the Senate. And current Republican Senate Majority Leader Mitch McConnell has said he is opposed to legalizing cannabis on the federal level. With Republicans in control of the Senate, legalization will face an uphill battle. It’s not insurmountable though.
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U.S. marijuana stocks have done exceptionally well since the U.S elections, and by all accounts, should continue to do well, especially with a Democrat in the Oval Office. That said, the trading experts at Learn-To-Trade.com understand that not all pot stocks are created equal; some will do better than others.
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