U.S. cannabis stocks rallied sharply this week after former President Donald Trump hinted at supportive policy changes that could reshape the industry. In a Truth Social video posted Sunday, Trump advocated for Medicare coverage of CBD (cannabidiol) products derived from hemp, highlighting their potential benefits for seniors managing pain, stress, and sleep issues.
This is the second encouraging signal from Trump in recent weeks regarding cannabis. Earlier, he suggested he may support reclassifying cannabis at the federal level, moving it from a Schedule I controlled substance to a lower-risk category. These policy hints have sparked strong buying momentum in cannabis stocks, particularly among major producers.
Cannabis Stocks Rally
Tilray Brands (TLRY) surged by 42% in a single trading day, making it the standout winner. Aurora Cannabis (ACB) followed closely with a 25% jump, extending its recent gains. Meanwhile, Canopy Growth (CGC) and Cronos Group (CRON) also posted solid increases of 18% and 15%. Although CGC and CRON have since fallen back to earlier price levels, TLRY and ACB have retained most of their rally-driven strength, boosting confidence in select cannabis stocks.
Market Outlook for Cannabis Stocks
According to Grand View Research, the U.S. cannabis market is expected to grow from $38.5 billion in 2024 to $74.0 billion by 2030, representing an impressive CAGR of 11.51%. This growth projection continues to make cannabis stocks attractive to speculative investors. However, risks remain high. Many companies have relatively small market capitalizations, and the sector’s volatility is well-known.
ETF Options for Safer Exposure
For retail investors seeking diversification, thematic Exchange-Traded Funds (ETFs) may be a safer route to gain exposure to cannabis stocks. The Amplify Seymour Cannabis ETF (CNBS) and the Amplify Alternative Harvest ETF (MJ) both performed strongly this week, with MJ rising 17.2%. The AdvisorShares Pure US Cannabis ETF (MSOS), which invests in U.S.-based multi-state operators through total return swaps, gained 11.9%. Similarly, the AdvisorShares Pure Cannabis ETF (YOLO) advanced 11% and holds nearly 40% exposure to MSOS.
Risk Factors to Consider
While the current momentum is encouraging, investors should remain cautious. Cannabis stocks continue to face major regulatory hurdles since cannabis is still federally illegal in the U.S. In addition, many companies struggle with weak balance sheets and inconsistent profitability. For those interested in long-term exposure, diversified ETFs holding multiple cannabis stocks may reduce company-specific risks while still benefiting from industry growth potential.
In conclusion, recent policy signals have injected new optimism into cannabis stocks, but the path forward remains uncertain. Investors should weigh both the opportunities and the inherent risks before diving into this high-volatility sector.
