Why Shares of Cannabis Stocks Are Rising This Week

Cannabis stocks received a boost this week as the White House urged the drug enforcement administration to reschedule the drug.

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Cannabis investors got a surprise this week when cannabis stocks started rising for the first time since September of last year. The entire industry got a boost after comments made from Vice President Kamala Harris over the rescheduling of cannabis from a Schedule I offence.

But is this announcement enough to keep a bull run rising? Let’s take a look at what investors may want to consider.

What happened

The rise in cannabis stocks happened as Harris stated the United States Drug Enforcement Administration (DEA) is “working as quickly as possible” to reschedule marijuana. The DEA confirmed back in January that it was conducting a review of the substance, with President Joe Biden stating two weeks ago the need to move on this.

“Marijuana is considered as dangerous as heroin and more dangerous than fentanyl, which is absurd, not to mention patently unfair,” Harris said during the roundtable discussion. “I’m sure (the) DEA is working as quickly as possible and will continue to do so, and we look forward to the product of their work.”

More good news

If you were to look at the performance of cannabis stocks in the last year, you wouldn’t think there had been a lot of positive news. However, taking a bigger picture, it seems as though we’re getting closer and closer to United States federal legalization.

This comes as the country now has up to 40 states that approve the use of marijuana. While some are still on board with medical marijuana rather than the use of it recreationally, noting that it’s safe enough for medical use is still a big step.

The move also comes after thousands of pardons were issued by Biden between October 2022 and December 2023. And while the rescheduling wouldn’t legalize marijuana, it certainly would provide it with enough room to move towards safer use. The goal, Harris and Biden have stated, would to be to classify it as a Schedule 3 drug.

Where to invest

If you’re looking to perhaps get in on the next wave of cannabis stocks, I wouldn’t necessarily hold your breath. It’s unlikely that we’ll see more moves until after the federal election comes in, whereby multiple states would likely vote on its use recreationally. Furthermore, should Biden lose the election, there could be rollbacks on the focus of marijuana as a legal substance.

For now, it might be better to think on a global scale. For instance, the Global X Cannabis ETF (NASDAQ:POTX) is a way to use this strategy. It invests in companies involved in the production, manufacturing, and distribution of cannabis and cannabis-related products. However, it’s also geographically diversified, with investments in North America, Europe, and Australia.

This would provide perhaps not the surge in share price we’ve seen from some pot stocks. But it could also mean far less volatility as well. That being said, even when investing in an exchange-traded fund (ETF), cannabis investments are inherently risky. So before you make any big moves, make sure this investment lines up with your own goals and risk profile.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

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