Today, cannabis stocks are on the move. Shares of Tilray (NASDAQ:TLRY), Sundial Growers (NASDAQ:SNDL), Canopy Growth (NASDAQ:CGC) and Aurora Cannabis (NASDAQ:ACB) are all up between 1% and 4% at the time of writing.
This move comes amid a rather bullish day for growth stocks. The Nasdaq exchange is up 1.6% at the time of writing, leading all exchanges. This upward move has come as bond yields remain higher than they’ve been in some time and inflation concerns remain.
Why’s that?
Well, today, lawmakers in congress passed legislation to avoid a government shutdown. Brinksmanship tied to the debt ceiling has provided the markets with extreme uncertainty in recent weeks. This has led to a rather risk-off market, relative to what we’ve seen in the past among more speculative asset classes.
Cannabis stocks certainly find themselves in the category of speculative assets. These companies are valued on the basis of forward-looking earnings that may or may not materialize years down the road. However, the ability for congress to agree on something has investors in this sector excited.
Here’s why.
Cannabis Stocks Higher on Legalization Hopes
The big catalyst for the cannabis sector this past year has been a win by President Joe Biden, coupled with a Democrat majority in the Senate. This political backdrop has been bullish for investors banking on U.S. legalization of cannabis. Of course, the ability for lawmakers to focus on cannabis has been limited of late due to the pandemic and other concerns.
However, today’s move to shift the debt ceiling discussion out a few months represents the ability of Congress to get something done. Accordingly, with this headwind out of the way, investors appear to be more bullish on the prospects for legalization legislation to be looked at, rather than immediately shot down.
What’s intriguing about today’s move in cannabis stocks is that this positive price action comes on the heels of some relatively dismal results for Tilray. The company missed expectations, posting a larger-than-expected loss and sales growth that didn’t meet many investor expectations. That said, TLRY stock is currently up along with the broader market.
For now, it appears that broader sentiment will continue to drive cannabis stocks more than earnings. These companies haven’t had their valuations tied to fundamentals ever, to begin with.
Accordingly, investors intrigued by cannabis stocks have a surprise win today.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
