With the 2020 presidential election nearing, the legalization of cannabis could become a hot topic. Will Sanders or Trump handle it better?
Bernie Sanders’s campaign
Democratic candidates are united on marijuana’s legalization, with Bernie Sanders being one of its staunchest supporters. When Sanders ran for Democratic nomination in 2016, he became the first major presidential nominee to support cannabis legalization. The year prior, he had introduced the Ending Federal Marijuana Prohibition Act to remove cannabis from Schedule I of the Controlled Substances Act. This year, he co-sponsored the Marijuana Freedom and Opportunity Act, aiming to decriminalize cannabis at the federal level.
On August 18, Sanders tweeted, “We must legalize marijuana nationally, expunge past marijuana convictions and ensure revenue from legal marijuana is reinvested in the communities most impacted by the failed War on Drugs.” This stand on the decriminalization of cannabis may appeal to African-Americans and Latinos, who are most impacted by marijuana laws. Along with Sanders, Kamala Harris, Joe Biden, Pete Buttigieg, and Andrew Yang support the legalization of cannabis.
Donald Trump’s campaign
Although Donald Trump is vocal on many issues, he has not shared his views on cannabis legalization. However, some believe that could change as we get closer to the election. As reported by The GrowthOp, Piper Jaffray analyst Michael Lavery expects Trump to make cannabis legalization a vital election issue to win over young voters. In a conference on cannabis policy, Lavery stated, “By supporting cannabis, Trump may be able to incrementally broaden his appeal with swing voters without alienating his base.”
US-China trade tensions have affected US farmers. Tariffs on agricultural products, such as soybeans, tobacco, and cotton, have dragged down exports and US farm income. This crisis has impacted views on Trump in the farming community. On August 23, AgWeb reported that farmers’ support for Trump had declined.
Could Trump advocate cannabis’s legalization to win back farmers’ support? Possibly—the legalization of hemp has come to their rescue amid trade tensions.
Importance of cannabis legalization
In June, Arcview Market Research and BDS Analytics reported that regulated US dispensaries’ total cannabis sales stood at $9.8 billion last year. By 2024, the research companies expect cannabis sales to grow 20% compounded annually to reach $30 billion.
Legalizing cannabis could generate billions in tax revenue, which could be used to help small farmers and businesses affected by the trade war. Also, cannabis’s legalization could grow farm income and create new jobs. On June 8, the New York Post reported that the cannabis business could generate 175,000–215,000 full-time jobs this year.
A pro-legalization stance by either side could also gain support from Millennials, who are often considered to be more open to marijuana. In 2017, Millennials comprised the largest part of the US workforce.
Performance of the cannabis sector this year
Hit by several regulatory scandals, the cannabis sector has underperformed broader equity markets. The S&P 500 has increased by 14.5% this year, while the Horizons Marijuana Life Sciences Index ETF and ETFMG Alternative Harvest ETF have fallen by 2.9% and 4.6%, respectively. Whereas Aphria (APHA) has returned 1.5%, Canopy Growth (WEED) (CGC) and Tilray (TLRY) have fallen by 14.8% and 62.4%.
On August 1, Aphria reported stellar fiscal 2019 fourth-quarter results, beating analysts’ top- and bottom-line expectations. The company has initiated several strategies to capture the growing cannabis market. Aphria stock has risen by 15.5% since the earnings announcement.
Meanwhile, Canopy Growth reported dismal fiscal 2020 first-quarter results on August 14, missing analysts’ forecast by a large margin. Since the earnings release, many analysts have lowered their price targets for Canopy, and its stock has fallen 26.8%. However, Canopy ex-CEO Bruce Linton is optimistic about the company’s strategy. And on August 26, Seaport Global Securities upgraded Canopy stock to “buy” from “neutral.”
On August 13, Tilray reported its second-quarter results, beating analysts’ revenue forecast. However, its net loss was larger than analysts had expected. As a result, its stock has fallen 42.4% since the earnings announcement.