Democrats and Republicans got mixed results in Tuesday’s elections, but marijuana stock investors enjoyed some big wins. Not only did Michigan and Missouri continue the cannabis momentum by legalizing marijuana on Tuesday, experts say a divided Congress is a best-case scenario for so-called pot stocks.
In addition to Democrats gaining a majority in the House of Representatives on Tuesday, Michigan voted to legalize recreational marijuana and Missouri voted to legalize medicinal marijuana, adding to the number of states that have legalized use of the federally banned drug. Even Utah voted to legalize medical marijuana, a measure that was opposed by the Church of Jesus Christ of Latter-day Saints. A measure to legalize recreational marijuana use in North Dakota was voted down.
Roughly 25 percent of Americans now live in states where marijuana is legal for medicinal and/or recreational use. Analysts say even Republican politicians are feeling the heat to soften their stance on cannabis.
“Encouragingly, support for cannabis achieved bipartisan support last year and Republican support was up 2 percentage points in 2018 to 53 percent,” Cowen analyst Vivien Azer says. “Given popular support for cannabis legislation and a preference by many Senate Republicans to respect state’s rights, a GOP Senate could advance a cannabis bill.”
In fact, Height Capital Markets analyst Stefanie Miller and the rest of the Height analyst team say a divided Congress is a best-case scenario for the U.S. marijuana industry.
“A Democratic House and Republican Senate is the most favorable scenario for marijuana companies, albeit the policy outcomes under this scenario will only be incrementally beneficial for the industry,” Miller says. “The two chambers would be reasonably positioned to approve legislation authorizing additional marijuana research, a necessary first step in our view before Congress can turn to more meaningful policy changes.”
Miller says it is likely that U.S. Attorney General Jeff Sessions will soon be replaced by someone with less of a hard-line stance on federal drug enforcement, but federal legalization is likely not in the cards in the near future.
The market is certainly pleased with Tuesday’s vote tallies. The ETFMG Alternative Harvest ETF (ticker: MJ) was higher by 2.3 percent. U.S. listed marijuana stocks Cronos Group ( CRON), Tilray ( TLRY) and Canopy Growth Corp ( CGC), are each up more than 14 percent so far this week.
More from U.S. News