Marijuana: The Rx for Recession Fears
Regardless of any partisan spin you may hear, the hard facts indicate that a recession is on the way. Even in this “post-truth” era, facts are stubborn things. However, there’s a recession-resistant sector that’s ripe with opportunity right now: companies involved in recreational and medical marijuana.
As Washington this week grapples with growing calls to impeach President Trump, little-noticed political developments are unfolding that are generating multi-year tailwinds for marijuana. I’ll get to the politics of marijuana in a minute. First, let’s look at the economic backdrop.
The global economy is showing clear signs of slowing, with three out of four economists in a recent survey predicting a recession by 2021. Some economists are warning that a recession could hit within 12 months.
President Trump blames recession fears on “fake news” and accuses the media of purposely talking down the economy to hurt his re-election chances. However, there’s nothing fake about the pronounced and prolonged decline in global Purchasing Managers Indexes (PMIs) so far this year for manufacturing activity (see chart, with data as of August 2019).
A reading above 50 indicates an increase in manufacturing activity; a reading below 50 indicates a decrease. The chart paints a grim picture for the world’s major developed economies.
Are you prepared for a recession? You can protect your portfolio and still tap into growth by investing in companies that are benefiting from “mega-trends.” One such trend is the legalization and subsequent commercialization of marijuana, which got big political boosts this week.
Although consumed with the pressures of impeaching Donald Trump, the House of Representatives yesterday passed a standalone marijuana banking reform bill, an historic first. The House advanced a bill that would protect banks that service the cannabis industry from being penalized by federal regulators.
Called the Secure And Fair Enforcement (SAFE) Banking Act, the legislation seeks to expedite the provision of financial services to cannabis companies by removing the fear of potential federal action against lenders. Many banks are reluctant to lend to marijuana businesses because of uncertainty over the industry’s legal status. The bill now moves to the Senate, where chances of passage are good.
The political momentum for pot is occurring overseas as well.
The folks “down un-dah” yesterday jumped aboard the marijuana legalization bandwagon. Australia’s capital Canberra, population 400,000, yesterday become the first part of the country to legalize recreational marijuana for personal use.
The city’s assembly voted on Wednesday to legalize possession by adults of up to 1.8 ounces of dried marijuana and cultivation of two marijuana plants beginning January 31. The rest of the country is expected to soon follow.
It’s yet another indication that marijuana legalization is a global trend with unstoppable momentum.
The green rush…
The marijuana “green rush” has overtaken Wall Street, as investors pursue marijuana stocks the way frenzied gold miners descended on San Francisco in the 19th century.
As with the gold rush of that bygone era, some green rush investors will get rich… and others will go bust. But the fact remains, marijuana commercialization is one of the most exciting investment opportunities that you will witness in your lifetime. Consider the actions of our neighbors to the north.
On October 17, 2018, Canada became the second country, after Uruguay, to legalize possession and use of recreational cannabis for all adults. Medical marijuana has been legal in Canada since 2001. Canada has left it to the provinces and municipalities to determine parameters, such as where cannabis can be bought and consumed.
In the U.S., marijuana remains illegal on the federal level. However, individual states can adopt their own legal standards for marijuana thanks to Congress, which prohibits drug enforcement agents from pursuing marijuana growers and users in states where pot is legal. In the U.S. to date, 30 states and the District of Columbia have legalized marijuana to some degree.
As of this writing, Congress is preoccupied with the impeachment inquiry, which House Speaker Nancy Pelosi initiated on Tuesday. It’s unknown how this process will shake out for the political parties, the financial markets, and the country. Brace yourself for chaos. But when storms worsen, that’s the time to seek the protection (and growth) of all-weather investments like marijuana.
How does impeachment affect stocks?
Think of impeachment as a form of indictment. President Nixon was under an impeachment inquiry (as Trump is now), but Nixon resigned in 1974 rather than face formal impeachment in the House and certain conviction in the Senate. When Nixon quit, stock markets plunged. But that probably had more to do with underlying fundamentals, as the economy stood on the cusp of a recession and subsequent bear market.
During Bill Clinton’s impeachment process in 1998-99, stock markets were volatile at first but ultimately soared after Clinton’s acquittal in the Senate. So far during Trump’s travails, investors have been rattled. But despite volatility, stocks are holding their own.
The Dow Jones Industrial Average, S&P 500, and Nasdaq all closed sharply higher yesterday. Stocks were poised to open higher Thursday morning, with index futures in the green in pre-market trading.
During the impeachment activity against Trump, a slew of important domestic legislation is getting sidetracked. But some initiatives, such as the marijuana banking bill, are still getting passed. Others will eventually return to the spotlight, especially efforts to expedite marijuana normalization.
U.S. Sen. Cory Booker (D-NJ) recently introduced legislation called The Marijuana Justice Act to legalize marijuana nationwide and expunge federal convictions for possession or use of the drug. Booker is running for president in 2020 and his rivals for the Democratic nomination support the bill.
Ever since the Democrats took control of the House of Representatives in November 2018, the move for full legalization of marijuana has gathered steam. The Democrats are a marijuana-friendly party. Even many Republicans are joining the chorus for marijuana legalization. The time to get aboard the pot sector is now.
If you’re looking to reap market-crushing gains in a short amount of time, tap into our exclusive cannabis trading event. We’ll show you how to make life-changing amounts of money, within a highly lucrative (but largely unknown) niche of the marijuana market.
As I’ve just explained, legal cannabis is a game-changer for investors. But here’s the snag: the industry is getting crowded and a shake-out is imminent. You need to pick the right marijuana stocks.
That’s why my colleagues put together a special workshop dedicated to marijuana investing. It could provide the Rx you need to cope with economic recession and political uncertainty. Click here for full access to our event.
John Persinos is the managing editor of Investing Daily.