New York Marijuana Legalization Teaches Important Lesson About Pot Stocks

An Important Reminder for Pot Stock Investors

At the end of March, we saw another massive jurisdiction legalize recreational marijuana: New York State. Pot stocks saw a small but noticeable uptick following the legalization. But the surge hasn’t been, naturally, as large as it would be if we were to see federal U.S. marijuana legalization.

But I’m not interested in what this event tells us about the day-to-day movement of marijuana stocks. I’m more interested in the valuable lesson that all pot stock investors can take from it.

Just recently, I wrote that, for all the variables in the marijuana industry, the one constant is its predictable growth path.

Between the Canadian marijuana market growing and more countries (like Mexico) and U.S. states (like New York) legalizing cannabis, it’s a virtual certainty that the market is going to get larger.

Chart courtesy of StockCharts.com 

In New York State alone, the legal marijuana industry could be worth roughly $4.2 billion. (Source: “New York Has Legalized Marijuana. Here’s What to Know.” The New York Times, April 1, 2021.)

And that’s just to start. We can anticipate yearly growth as access increases, brick-and-mortar locations open up, the black market shrinks, and production costs drop (pretty much a repeat of what we’ve seen in the Canadian marijuana market up to this point).

While it will take some time before we see the full potential of the New York legal pot market (anywhere from a few months to a year or so), it’s a very promising market for weed companies to enter as the U.S. waits for federal marijuana legalization.

And that’s what I really want to discuss here: the lesson that we need to learn from New York State.

While I don’t want to get into the nitty-gritty details of why we’re all of the sudden seeing New York’s marijuana legalization bill enter into law, suffice to say, it’s not a coincidence that it’s happening while Governor Andrew Cuomo faces several controversies.

Between a scandal over liability protections for the nursing homes that many believe have led to the unnecessary COVID-19 deaths of thousands of seniors, and multiple accusations of sexual harassment, “embattled” seems too soft a word for the amount of political trouble Cuomo is in.

The cynical observers of Cuomo’s recent push for marijuana legalization believe this to be a deflection, a way to pass a popular bill that will take some of the heat off him.

That’s a valuable lesson to be learned from this episode—and something we were already aware of, to be fair.

In Canada, Prime Minister Justin Trudeau ran his first successful campaign for prime minister partly around marijuana legalization. This, no doubt, played a part in his electoral victory.

What’s more, the hope was that other politicians would see the potential of marijuana legalization as a viable way to drum up support. Cuomo could be banking on the same type popular support gathering around him in his time of need.

If it works, it will be more proof that marijuana legalization is so popular that politicians can use it to help rescue themselves from certain political doom.

All that remains to be seen.

But as Cuomo’s scandals move out of the spotlight and calls for his resignation cool—while celebrations over New York pot legalization intensifies—it’s looking more and more like it’s a savvy political move to have marijuana legalization in your back pocket, either as a way to win reelection or as a way to divert attention from scandals.

Politicians will watch Cuomo’s move and understand the implications. Considering that many politicians in the U.S. have principles that begin and end with how they’ll affect their reelection chances, marijuana legalization could become radically more popular next election cycle.

In the next midterm elections (in 2022) and the next presidential election (in 2024), we could see more U.S. politicians adopt marijuana legalization as an important pillar of their campaign platforms.

If, say, President Joe Biden, running for reelection, sees a tough fight from a Republican opponent, he may turn to U.S. marijuana legalization to help him eke out a victory.

Americans often are bored during midterm elections and predictable presidential races; that means smaller voter turnout. But an issue like pot legalization could help drive voters to the polls, which in turn could help juice marijuana stock prices.

All this is to say we’re entering an exciting period for the pot stock market.

Once again, we’ve seen weed legalization in the U.S. as an immensely popular and politically savvy decision for figures who need a boost. As the proof of this becomes undeniable, other political figures will take notice, which means we could see some serious movement on this issue in the next two to four years, meaning potentially huge gains from marijuana stocks during that period.

Analyst Take

While 2021 hasn’t turned out exactly as we had hoped for marijuana legalization in the U.S., it hasn’t been all bad news, either.

Whatever your political leanings, having a Democrat in the White House is positive for pot stocks. Just how positive it is having this particular Democrat in the White House remains to be seen, but it’s still a step up from Donald Trump’s at-times antagonistic take on marijuana legalization.

As discussed above, another huge boon for the cannabis market has come by way of New York State, where marijuana legalization isn’t just about to open up billions of dollars in opportunities, but also proves once again how politically popular marijuana legalization is.