The political landscape's potential shift is casting a spotlight on cannabis stocks. According to equity research firm Zuanic & Associates, the recent news that President Biden will not seek re-election has sparked a positive reaction in the cannabis sector.
Analysts at the firm note that the likelihood of Kamala Harris winning the Democratic nomination is seen as favorable for cannabis stocks. They report that the stock of Canopy Growth (TSX:WEED) (NASDAQ:CGC) surged by 17%, and other major licensed producers (LPs) saw an average increase of 9%, with the MSOS ETF climbing by 5.7%.
Zuanic & Associates highlights that Harris's stronger chance against Trump, according to recent polls, reduces the risk of a "red wave" in November. This is anticipated to boost Democratic voter turnout, which could further benefit cannabis stocks.
However, the path to federal rescheduling of cannabis remains complex, says the firm. Despite the optimistic scenario of Harris advancing cannabis reform, Zuanic & Associates caution that the road to rescheduling is fraught with obstacles.
They point out that the process could face delays from the Department of Justice (DOJ) and the Drug Enforcement Administration (DEA). A final rule on rescheduling before December 21, 2024, is still a possibility, but the "roadblocks are mounting."
A Harris vs. Trump election is likely to intensify the cannabis debate, believes the research firm. They believe that while this could bring cannabis reform into sharper focus, it may also increase partisan risks. They feel that if Trump wins, cannabis stocks could face uncertainty as Trump is expected to maintain the status quo without rescheduling.
Overall, Zuanic & Associates believes that a Harris victory in November would be more beneficial for cannabis stocks compared to a Trump win, given Harris's potential to advance rescheduling and other reforms.