The cannabis sector made many fortunes after the 2015 Canadian federal election. Trudeau’s Liberals made good on their promise to legalize recreational cannabis. For cannabis investors, this has been a classic case of be careful what you wish for.
There have been some positive developments. Supply for big producers is starting to ramp up, but when this leads to a glut that “positive” could quickly turn sour. Canada pushed forward with “Cannabis 2.0” late in 2019, which will allow cannabis companies to legally sell vape pens, edibles, and other niche products that were not included with the first phase of legalization.
All this aside, the biggest mover for the industry could be the United States presidential election. Cannabis boosters have longed for federal legalization. Bernie Sanders, the current front-runner for the Democratic party, has vowed to pursue federal recreational cannabis legalization in his first day in office. The opening of the U.S. market would be a game-changer for major producers. Some, like Canopy Growth, have secured partnerships with major U.S. firms and are waiting in the wings to move in.
The Horizons Marijuana Life Sciences ETF (TSX:HMMJ) offers a broader approach to cannabis investing. Its shares plunged 19% in 2018, 33% in 2019, and have fallen 1% so far in 2020. These results illustrate how badly this sector needs a boost. Those who are holding out hope for a second cannabis bull run should watch the 2020 race closely.
