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The 2020 election has started fresh conversations about the legalization of cannabis on a recreational and medicinal level.
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In August 2020, the Medical Cannabis Wellness Equity Index (NTR) gained 7.32 per cent. This follows a continuous rise in the demand and use of medical cannabis in the U.S., as a result of adult users looking to alleviate pandemic-related anxieties and stress, according to The Medical Cannabis and Wellness UCITS ETF, a medical cannabis exchange-trade fund.
“We have seen strong returns for investors in the cannabis sector in recent weeks, and the second half of the year has been nicely set up for some major catalysts on a macro and company-specific level,” said Nawan Butt, Portfolio Manager of The Medical Cannabis and Wellness UCITS ETF.
Other factors influencing this rise in cannabis’ popularity include the growth of tele-medicine overcoming the stigma of cannabis, as more patients become comfortable in a virtual setting. Also, Butt believes that the rise of institutional investors in the industry is lifting valuation multiples.
With the upcoming presidential election in the U.S., Butt believes that the focus on cannabis legalization will come into the forefront: “As we inch closer to U.S. elections in November 2020, cannabis is starting to become a topic of discussion for the Democrat party,” said Butt.
“In July, a Biden-Sanders Unity Task Force released recommendations for developing the party agenda on cannabis reform. This includes the federal legalization of medical cannabis, while adult-use cannabis is to be left to the will of individual states. The task force also recommended the expungement of all criminal records related to cannabis possession and consumption in an attempt to remediate long-standing social injustices against communities of color in the U.S.”
However, while the numbers are currently promising, Butt stresses the importance of cautious optimism: “It is important to note that a White House win alone may not expedite the process, and we closely watch the contested seats in the Senate as Democrats fight to take control from the Republicans. In the run-up though, we continue to see an insatiable appetite from US investors for cannabis-related businesses with the ancillary services sector having a breakout month in July and leading into August. We expect this multiple expansion to continue as a wider investor base realizes the growth and margins on offer in this still nascent industry.”
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