Ali McCartney, Managing Director of UBS Private Wealth Management, discusses how geopolitical tensions are impacting the market on how money is made.
Despite this year’s strong performance, new proposed federal rules governing marijuana have so far failed to spark new buying interest in exchange-traded funds (ETFs) that track stocks of North American cannabis companies. has not yet been reached.
Marijuana ETFs and cannabis stocks soared last week after the U.S. Department of Justice announced plans to reclassify marijuana as a less dangerous drug. Stocks with big gains include the Round Hill Cannabis ETF, AdvisorShares Pure Cannabis ETF, and Amplify US Alternative Harvest ETF, all of which are up 29.6% to 36.6% year-to-date and look forward to 2024. is one of the top performing ETFs.
However, for many funds, the gains have not yet translated into asset growth. This suggests that ETF investors are wary of making big new bets on the sector.
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Of the nine cannabis-focused ETFs in the U.S. market, only two have seen inflows since the Justice Department announcement: AdvisorShares MSOS2x Daily ETF and AdvisorShares Pure US Cannabis ETF, according to data from LSEG Group. .
“The rally we’ve seen so far is focused on cannabis, which has been waiting for this news but already has money in some of its favorite stocks,” said Steve Sosnick, market strategist at Interactive Brokers. “It’s coming from investors.”
A cannabis grower tends to plants on his farm in Humboldt County, California, on August 28, 2016. (Reuters/Rory Carroll/Reuters Photo)
Some analysts believe that ETF investors wary of jumping into cannabis funds could mean a shakeout in the space is looming. Already this year, GlobalX Funds has closed $29 million of the GlobalX Cannabis ETF. Global
“This is a relatively crowded niche product,” said Todd Rosenbluth, head of research at Vetta Fi. “Further closures are possible if demand is not realized in 2024.”
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But analysts also said the fund could start raising money if the Justice Department’s proposal to reclassify cannabis causes a new wave of investors to focus on the industry.
