There’s a lot riding on the outcome of the upcoming presidential election for cannabis exchange traded funds, including the Global X Cannabis ETF (NASDAQ: POTX).
POTX, the first cannabis fund from Global X follows a benchmark that holds “companies involved in the legal production, growth, and distribution of cannabis and industrial hemp, as well as those involved in providing financial services to the cannabis industry, pharmaceutical applications of cannabis, cannabidiol (i.e., CBD), or other related uses including but not limited to extracts, derivatives or synthetic versions,” according to Global X.
The consensus is that victory by Democratic nominee Joe Biden would be beneficial to cannabis equities and ETFs.
“Democratic presidential candidate Joe Biden and vice presidential candidate Kamala Harris have proposed decriminalizing cannabis,” writes Morningstar analyst Kristoffer Inton. “Although this would simply reduce incarceration for low-level possession crimes, it could signal the easing of federal prohibition.”
POTX’s Political Potential
The global cannabis market is expected to grow to $630 billion by 2040, compared to $12 billion today. The cannabis industry is expected to expand into a $22 billion hemp-derived CBD product market in 2022, up from $591 million in 2018. Looking ahead, Canada’s cannabis industry is projected to grow six-fold in market value by 2026, up from $1.6 billion in 2018.
However, the big kahuna when it comes to marijuana industry growth is the U.S. and market observers believe increased liberalization here will open the door to upside for weed stocks.
“Presidential election aside, Arizona, Montana, and New Jersey are voting on recreational legalization, Mississippi is voting on medical, and South Dakota is voting on both,” notes Inton.
Canopy, a POTX component, “is the only Canadian company we cover that has direct exposure through its deal to acquire U.S.-based Acreage Holdings immediately upon change to federal law. We think Canopy paid a good price and acquired an attractive option for an accelerated entry into the U.S. cannabis market,” according to Morningstar.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.