Cannabis Stocks Unlikely to Be Hurt by a Stock Market Correction

You’re reading this week’s edition of the New Cannabis Ventures weekly newsletter, which we have been publishing since October 2015. The newsletter includes unique insight to help our readers stay ahead of the curve as well as links to the week’s most important news. We no longer send these by email as we did in the past, but we post this and all of the newsletters on our website here.

Friends,

The cannabis market as measured by the New Cannabis Ventures Global Cannabis Stock Index peaked in February of 2021 and has dropped a stunning 90% since then. The S&P 500 has rallied to a new all-time high. How overall stocks are performing can play a role in how cannabis stocks perform, and the S&P 500 has spiked sharply and now could be pulling back.

While the S&P 500 is a very popular index, it is very different from cannabis stocks in terms of its market caps. I have long suggested that the better index to watch is the Russell 2000, which measures small-caps. Over the past week or so, the Russell 2000 has soared after lagging the S&P 500 terribly. It is still up 10.7% in 2024 compared to the S&P 500 rallying 17.2%. Here is the action in July so far:

Looking at the Global Cannabis Stock Index compared to those two stock indices, it appears that it follows the Russell 2000 to some degree over the past year:

Cannabis investors should not be concerned with the overall stock market potentially coming off, as cannabis stocks are really beaten up still despite the rally this year. While the overall demand for stocks plays a role, there are other factors.

We said in early May that the bear market may be over. Our lack of willingness to declare that a new bull market had begun was based on uncertainty about 280E taxation going away and concerns about the balance sheets of MSOs. The news about Ascend extending its debt this week was very positive.

280E going away would be fantastic, and this is something that we have been talking about here since 2022. There are many other things to watch, too. While the likelihood of 280E going away has increased, it is still not a done deal. Since the peak in cannabis stocks on April 30th, prices are down a lot, but they have started to lift:

Our newsletters have been more optimistic over the past few weeks, and the comment period the DEA is offering regarding rescheduling ends Monday. Rescheduling remains on track to take place, which would end 280E taxation for the American cannabis operators.

We are facing a presidential election in less than four months. Cannabis investors got too excited by the elections four years ago, and the market peaked right after Biden was sworn in. It’s not clear what the election outcome will be, but many investors likely fear a return of the person who brought Jeff Sessions to the role of Attorney General. So far, there has been no anti-cannabis talk from the Trump campaign.

We are still not ready to declare that a new bull market in cannabis stocks has already started, but the sector could perform very well. Not all cannabis stocks are bargains here, but many offer great reward relative to risk. The stock market may correct, but cannabis stocks could do a lot better.

New Cannabis Ventures publishes curated articles as well as exclusive news. Here is some of the most important content from this week:

Exclusives

Capital Raises

Ascend Wellness Refinances Debt

To get real-time updates download our free mobile app for Android or Apple devices, like our Facebook page, or follow Alan on Twitter. Share and discover industry news with like-minded people on the largest cannabis investor and entrepreneur group on LinkedIn.

Use the suite of professionally managed NCV Cannabis Stock Indices to monitor the performance of publicly-traded cannabis companies within the day or over longer time-frames. In addition to the comprehensive Global Cannabis Stock Index, we offer the Canadian Cannabis LP Index, the American Cannabis Operator Index and the Ancillary Cannabis Index.

View the Public Cannabis Company Revenue & Income Tracker, which ranks the top revenue producing cannabis stocks.

Stay on top of some of the most important communications from public companies by viewing upcoming cannabis investor earnings conference calls.

Discover upcoming new listings with the curated Cannabis Stock IPOs and New Issues Tracker.

Sincerely,

Alan

Based in Houston, Alan leverages his experience as founder of online community 420 Investor, the first and still largest due diligence platform focused on the publicly-traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and facilitate its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Before shifting his focus to the cannabis industry in early 2013, Alan, who began his career on Wall Street in 1986, worked as an independent research analyst following over two decades in research and portfolio management. A prolific writer, with over 650 articles published since 2007 at Seeking Alpha, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source to the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | Email