Volatility Continues to Remain High in the Cannabis Industry
After being crushed for several months straight, marijuana stocks quickly began to bounce back in March of this year. Of course, this can all be attributed to the impact of Covid-19, but it remains. Since March, we have seen a great deal of positive momentum in the cannabis industry. This is characterized by a large number of days with double-digit percentage gains. Although this is great for those who invest in pot stocks, growth like that seems to be very unstable. Usually, high percentage jumps are always followed by market corrections.
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And in this natural economic process, we see just how volatile the industry is. With marijuana stocks, the swings back and forth seem to occur more than in other markets. Now, this could simply be due to the fact that the cannabis industry is still very much in its infancy. As a whole, marijuana stocks have only really been popular for the past five years or so. With that in mind, we can begin to see just why certain pot stocks to watch and the cannabis industry at large, can be so volatile.
What is Driving Marijuana Stocks To Be Unstable?
On the other hand, sometimes investors are looking for a greater amount of security and stability in their investments. This can often deter investors from putting money into pot stocks. So the question remains, when will marijuana stocks begin to stabilize? Well, this answer seems to have several layers. For one, it appears as though 2020 may have some more instability in store for the cannabis industry. With catalysts like the elections coming up and the advent of the Coronavirus, swings are likely to continue occurring.
Pure play marijuana stocks like Cronos Group Inc. (NASDAQ:CRON) and Canopy Growth Corp. (NYSE:CGC), have taken the brunt of this volatility, but this is also dependent on their own business models as well. In a broader sense, the cannabis industry’s stability is defined simply by legislation. In the U.S., we have yet to see an affirmative stance on cannabis by the federal government. This means that states are forced to make their own laws, leading to difficulties and uncertainty in the industry. Until this issue begins to be solved, we may continue to see high fluctuations in many marijuana stock prices.
When Can We Expect Pot Stocks To Be More Stable?
The short answer is that we don’t know. What we do know is that the industry is continuing to grow at a fast pace. And whenever an industry grows, it often is quite unstable until a certain point. With legalization efforts in the works, hoping to boost the legitimacy of marijuana stocks, calmer markets could be on the horizon. With that in mind, the current state of world events makes it difficult to contend with the question of stability.
Rather, we as investors can watch the cannabis industry and pot stocks specifically, to determine which might be calmer than others. With that in mind, we can then use that information to compile a portfolio that has the right mixture of safe and less safe marijuana stocks to watch.