Cannabis is now legal in Canada, which means we can partake freely without fear of prosecution. However, cannabis also has a major impact on the Canadian economy. As individuals, we can legally invest and trade in cannabis stocks. As a country, we’ve seen even larger results. And while you’re certainly familiar with cannabis, you probably aren’t familiar with what’s been happening in the economy since October.
Here are some of the basics of the Canadian cannabis industry, from before legalization, to current stats, to future predictions.
Cannabis As a ‘Safe’ Investment
Leading up to legalization, cannabis stocks were on the rise. They seemed to be a sure-fire investment with minimal risk. After all, we all know at least one person who smokes. In fact, Statistics Canada predicted spending on legal cannabis would range from $816 million to $1 billion. Other research showed that Canada’s medical cannabis industry was growing by as much as 10% per month. Figures like these led many people to invest.
Coming up with these stats is difficult because we don’t have much to go on. Only one other country – Uruguay – has fully legalized recreational cannabis. Plus, there are no real reports on the illegal cannabis industry in Canada. There really wasn’t enough information available to make a fully accurate assessment of cannabis’ economic effects. This means that predictions were all based entirely on speculation.
However, following the legalization of cannabis, many industry experts expected there would be some economic uncertainty. A lot of the opportunities people were expecting fell through. In the early hours of the morning after legalization, cannabis stocks began to fall.
They did recover their losses throughout the day, but this kind of volatility was seen throughout the early days of legalization and is expected to continue in the near future. This pattern can even be seen through October and November as cannabis stocks continued to rise and fall unpredictably. Many cannabis stocks are just beginning to stabilize, and investors are starting to look at them as viable investments.
The Current Situation
Right now, things are still shifting, losing value, and then rebounding. There’s a lot of uncertainty when it comes to the cannabis economy. According to the Financial Post, the three biggest licensed producers in Canada (Canopy Growth Corp., Tilray, and Aurora Cannabis) have a combined market value of more than $30 billion.
But this hasn’t reassured investors who are continuing to bail on cannabis stocks. Why are investors pulling out? They remain concerned about:
- Cannabis shortages
- Losing customers to a potentially more affordable black market
- The potential pitfalls of investing in unknown companies
Fortunately, these are all concerns that will be solved over time with adjustments. Unfortunately, there are no clear answers for how long it will take to address these issues.
In spite of the current uncertainty, projections for cannabis continue to be positive. Some are going as far as to say that cannabis stocks may double in 2019. The industry is still new, which means it’s growing and shifting quickly. Provinces are still searching for the best way to regulate and sell cannabis, there are cannabis shortages and other factors that are causing the industry to be unstable, and the black market is always a concern.
Most experts agree that the cannabis industry will begin to level out as the rules governing the industry begin to settle. If you’re looking at investing in cannabis, check out this article on the 10 Best Marijuana Stocks to Buy in 2019.