Should You Bail on This Cannabis ETF in the Second Half of 2019?

Cannabis stocks started out hot in 2019 even though there were concerning trends bubbling beneath the surface. Sales of cannabis broadly fell from December 2018 to January 2019 as producers have struggled to keep up with the surging demand following recreational legalization.

Analysts have soured on many of the top license producers because of this dip.

The Horizons Marijuana Life Sciences ETF (TSX:HMMJ) seeks to replicate the performance of the North American Marijuana Index.

Shares of the ETF have climbed 33% in 2019 as of close on June 5. This came after a nearly 20% drop for the full year in 2018. The ETF has dropped 16% over the past three months with cannabis stocks succumbing to volatility.

The cannabis sector has been particularly vulnerable to broader turbulence over the past two and a half years. North American markets were struck by volatility in May due to U.S.-China trade tensions and concerns over global growth.

Dovish central banks have worked to ameliorate some of that anxiety, but there is a good deal of uncertainty as we look ahead to the summer.

Top producers are gearing up for a radical ramp up in production capacity in the second half of 2019. Experts are projecting that the industry will transition quickly from a supply shortage to a glut early next decade.

Even after a spring retreat cannabis stocks do not offer the kind of value growth investors should be looking for in a volatile market.