With optimism returning to the stock markets and a growing sense that U.S. marijuana laws are headed for an overhaul, many of Canada’s largest cannabis companies have seen their share price soar since the start of the year.
The Canadian Marijuana Index, which tracks 20 large, publicly-traded cannabis firms, was trading at 723.74 at 1 p.m. ET on Monday, just about 60 per cent higher than its closing level on Dec. 31, 2018. However, that is still below a peak of 858.19 that it hit last October, days before legalization.
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From October to December of last year, the index lost about half its value amid a stock market rout. As a fledgling industry, cannabis tends to see larger fluctuations in stock prices than you would see in more established industries.
But since the start of the year, traders have come back to cannabis, pouring money into the markets in part because of growing optimism that the U.S. is now headed rapidly towards decriminalization at the national level.
The 2018 U.S. Farm Bill, which President Donald Trump signed into law last December, removes cannabis with low concentrations of tetrahydrocannabinol (THC) from the list of scheduled drugs. This means it is now legal in the U.S. to produce hemp products as well as cannabidiol (CBD), a non-psychoactive cannabis extract known for its properties in treating anxiety and depression.
Many analysts say the global CBD market is set to explode. Some in the industry have also suggested that, in an effort not to fall behind in the burgeoning cannabis field, the U.S. will take steps as early as this year towards legalization.
Cannabis stocks have also been helped along by stronger-than-expected earnings forecasts from some Canadian cannabis producers. This has convinced some investors that the legal marijuana industry in Canada will live up to its hype.
This despite the many hiccups that came with the rollout of legal weed, including supply shortages at some outlets, a recall of mouldy pot, and even layoffs at New Brunswick’s cannabis retailer.