When This Happens, Expect Marijuana Stocks to Soar

Pot Stocks to Win Big

The legal marijuana industry has always been—up until this point—driven by the news. When Canada announced that it would legalize cannabis, investors flocked to the budding industry and saw pot stocks swell in price in the years that followed.

When at times marijuana stocks stagnated, outside investment and other major events helped turned the tide.

Right now we’re in the midst of a correction for pot stocks that some claim is going to be long-term. I don’t believe that, and any number of major events could help turn the tide.

Of course, it’s federal U.S. marijuana legalization that is truly going to see marijuana stocks reach their potential.

Governments have not legalized pot across the whole world, making the trade tricky at best and impossible at worst in some situations.

The U.S., for example, has the largest legal marijuana market on Earth, with 11 states and Washington D.C. permitting recreational pot, alongside 33 states that allow medical marijuana.

Yet the federal government still has a prohibition on marijuana that makes all these “legal” markets in violation of federal law.

This paradox has made itself known in all sorts of nagging ways, from banking issues to investor fear of a government crackdown on the marijuana sector.

The second way that governments have been artificially creating a rift in the legal pot market is through heavy taxation.

One of the ways that recreational marijuana was able to make so much political progress over the past few years was the promise that the drug would be taxed, and that the taxes would be used to better the community.

Tax marijuana, build schools. It was a simple yet powerful selling point that brought many over to the legalization side of the argument.

The drawback, however, has been that high taxes have led to marijuana prices in the legal market being inflated compared to the prices in the black market.

The second part of that problem is that the governments in question haven’t done enough to crack down on the still-thriving black market. California, for instance, the largest marijuana market on Earth right now, still has a black market that dwarfs its legal one.

U.S. Marijuana Legalization

If all the illegal sales were able to be brought into the legal market, that would effectively jump-start marijuana stocks. It would be akin to a second legalization, in terms of how powerful and lucrative it would be.

So much money is being siphoned away by illicit dealers, and governments are doing little to crack down on this. As such, there’s a faulty system that penalizes legal marijuana sellers and creates an unfair competitive advantage for black-market providers.

Consider this: Canada only recently legalized edible marijuana products. But in the meantime, many consumers have been able to get their hands on edibles from black-market operators.

The black-market sellers have operated with near-impunity, representing a failure of governments to act on behalf of the law-abiding marijuana sellers.

But all these problems can and will be fixed. Moreover, the future of pot stocks remains bright for one major reason: the eventual U.S. marijuana legalization at the federal level.

U.S. Marijuana Legalization

The pot industry definitely needs to tackle the black market if it hopes to ever reach its full potential. But that is a complicated problem. A simple solution to marijuana-stock woes in the U.S., however, lies in federal legalization.

U.S. marijuana legalization has never been closer to becoming reality as it is now, and pot investors ought to be excited. When Canada legalized weed, it sent share prices soaring. And Canada only has a total market that’s smaller than California.

So when federal U.S. marijuana legalization eventually comes through, cannabis stocks will skyrocket. Of that I’m almost certain.

And it is inevitable that marijuana will be federally legalized in America. Growing support across the political spectrum is making it harder and harder to ignore it as a political issue.

Many of the Democratic Party’s front runner contenders for president have come out with some form of marijuana legalization in their platforms.

Federal pot legalization in the U.S. would be enough to spark major growth in the marijuana industry.

The question, as always, is when will U.S. marijuana legalization come? At this point, it could be anywhere from one year to a decade.

But no matter how long it takes, rest assured that marijuana stocks will be soaring when that day comes.

Analyst Take

There’s so much potential remaining in the pot industry that it boggles my mind that some analysts are so quick to proclaim the legal marijuana industry dead.

Between cracking down on the black market and legalizing marijuana in major markets like the U.S., there are so many ways that governments could help pot stocks not only regain their former highs, but surpass them.

In the coming years, the global legal marijuana trade is assuredly going to grow many times larger than it is right now. With that, investors ought to be excited about the future of marijuana stocks, instead of scared.