A recent crash in the stock market has helped to display how resilient cannabis is to traditional pullbacks in the market. A drop of around 1,175 points for the DOW during the beginning of February, helped to show how the cannabis industry does not respond in the same way that typical stocks do.
An investment analyst in the cannabis industry, Alan Brochstein, recently stated that “Cannabis stocks experienced some early weakness, following through from last week’s steep declines, but they reversed early, led by buying in Canada.” The Canadian market has also helped to be a large influencer on the cannabis market around the world, helping to take up some of the slack when if the market weakens by any amount in the U.S.
Looking at the Global Cannabis Stock Index, which is made up of 75 publicly traded cannabis companies, the index dropped by around 8% compared to the S&Ps drop of around 4.1%. The market did not continue to drop however, it actually rebounded to a 6% gain. This continues to show how the market can stay strong in times when other markets are not able to do so.
From the period of Nov. 1 to Jan. 3 of this year, the cannabis industry has seen an average rise in price of around 205%, which is quite unprecedented in any other market. The market has also continued to rise at this level, facing only a few short pullbacks on its journey up. Stocks in the Canadian market followed a similar trajectory, seeing a 7% price drop during the beginning of the day, but by the end, the market was up by as much as 10% overall. Brochstein stated further that “many of the leading licensed producers had already seen their prices decline by over 50% within the past month.”
The industry is continuing to face a massive amount of forward momentum as a continuous stream of positive legislation continues to enter the market. As laws are made to help grow the industry, on a federal level in both Canada and the U.S., the hopes are that the market will continue to grow by this exponential amount.
One of the many reasons that the marijuana industry is so resilient to pullbacks is because it does not function in the same way that traditional markets do. People seem to have a dependence on cannabis for medical use that cannot be lowered by the happenings of the market. Similar to pharmaceuticals, marijuana is more than just a commodity, it is a medicine.
Cannabis has viability for treatment across many of the most prevalent diseases we see in today’s world such as cancer, seizures and more. With research on the market growing on a daily basis, new medicines are continuing to be made that will hopefully be able to replace some of the harsher, more traditional forms of medicine we have such as opiates. The lack of negative side effects and high success rate for treatment means that marijuana is here to stay.
From a financial standpoint, the industry on marijuana is continuing to grow at a very rapid pace. The Canadian market is set to explode if the country is able to legalize cannabis on a recreational level which is expected to occur. The hopes are that the U.S. market will be able to legalize some version of this in the near future, but given where cannabis stands on a federal level in the states, it seems like this may be sometime in the not too distant future rather than immediately.
As the market on marijuana is continuing to grow, the hopes are that the financial side of things will continue to stay extremely stable when compared to other markets. Only time will tell how successful the industry will continue to be in the near future, but if it follows the current path, the sky is the limit for cannabis.
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