The Motley Fool

ALERT! The U.S. Election Could Spark a Run on Weed Stocks

The 2015 Canadian federal election sparked a massive run for cannabis stocks that made many fortunes. In late 2019 I discussed why the most recent federal election would not lead to any consequential changes in the near term for the industry.

The handling of legal cannabis has left a lot to be desired in Canada, as supply issues and a lack of retail availability on the ground have driven consumers back into the arms of the black market.

Infor Financial Group CEO Neil Selfe said in 2019 that Canada missed its chance to be a global leader in the emerging sector.

Canopy Growth (TSX:WEED)(NYSE:CGC) stock has dropped 54% year over year as of mid-afternoon trading on February 5.

Shares received a shot in the arm recently after Bank of Montreal analysts raised its price target. BMO cited reports that Canopy was outselling other product lines at the retail level.

This is especially encouraging news after “Cannabis 2.0,” which included the legalization of edibles and vape pens in late 2019.

There is another development that could spark a massive run for Canopy Growth over the next year  — one that investors need to keep an eye on.

Cannabis and the 2020 U.S. election

Investors saw firsthand the explosive impacts an election can have on a young industry like cannabis. The prospect of federal legalization in the United States has been a dream for cannabis boosters for years.

Leading democrats and republicans have dragged their feet on the issue, preferring instead to punt the issue to states. This could change in the 2020 election, however.

It goes without saying that there’s incredible uncertainty as we look ahead to November 2020. The Democratic primary kicked off this week with the controversial Iowa caucuses.

Astoundingly, the results have yet to be fully unveiled. As it stands today, Democratic candidates Pete Buttigieg and Bernie Sanders appear to be contending for the most delegates.

The next primary takes place in New Hampshire next week, where Bernie Sanders holds a comfortable lead in the polls.

Sanders has now climbed above his competition, according to odds makers. The race will grow even more interesting with the entrance of Michael Bloomberg after the first four primaries.

The former New York mayor has seemingly limitless cash reserves that he has vowed to spend liberally in a bid to win the nomination.

Though it’s still early, Sanders looks like the front runner, which should make cannabis enthusiasts happy. “We will end the destructive war on drugs,” Sanders said recently at a rally in Cedar Rapids.

“On my first day in office through executive order we will legalize marijuana in every state in this country.” Michael Bloomberg, on the other hand, is vehemently opposed to legalization.

What does this mean for cannabis stocks?

We will have a long primary to sit through before a democratic nominee is chosen. Even a small shot at federal legalization is reason for excitement if you’re betting on Canopy Growth.

The company has established a bridgehead into the massive U.S. market with its conditional acquisition of Acreage Holdings.

It also has its multi-billion partnership with Constellation Brands to lean on. Federal legalization in the U.S. would be huge for Canopy Growth this decade, and so Cannabis investors will want to keep their eyes on this election.

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Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Brands.

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