Ted Ohashi's Marijuana Stock Market Review & Outlook

Both the U.S. and Canadian markets rebounded with small gains after both being on the downside last week. The Dow posted a health advance of 1.7% while the S&P TSX Index rose a tiny 0.1%. The highs that you can see on both charts are all-time peaks for the indexes. In most past cycles I’ve looked at, investors start getting worried when former record levels for stock price indexes are approached but the markets generally press on to much higher levels. As these indexes haven’t even surpassed previous highs, I think it’s much too early to be concerned. Recently, I talked about an inversion in the U.S. yield curve, that is, where short term interest rates are above long term interest rates. Last week the term structure of Canadian interest rates also inverted. This is a precursor of recessions historically but that may be a year or more away. So I think it’s too soon to start shifting portfolios just yet.

The LTB Marijuana Composite ended two weeks of moderately higher prices with a fractional decline of 0.8%. Momentum was even weaker. As I explain in more detail in Marijuana Matters below, I have been increasingly concerned about the consequences of a Liberal government loss in the October 21, 2019 election. There is a by-election scheduled in the Nanaimo-Ladysmith riding on Vancouver Island on May 6, 2019. I’m not sure this will reveal anything surprising. The seat was held by an NDP candidate. Nationally, as the polls now stand, the Liberals are in a difficult position and the more recent polls suggest the momentum is strongly against them. Anything can happen in politics but the Prime Minister continues to stumble. This is likely a situation in which the cannabis stocks will tell us more about the election than the election tells us about cannabis investment.

The lower low priced stock group outperformed the large cap, Licensed Producer Group for the first time in several weeks. The LPs recorded a loss of -1.7% compared with a gain of +1.9% for the low priced group. I don’t think one week marks a change in trend but every change in trend starts with one week. So I will watch this development closely.

Here is a look at some of the cannabis stock charts in the U.S. Marijuana Index group owned and managed by MJIC. For some time I have been urging readers to consider reducing their investments in companies more dependent on the Canadian market and increasing your interest in U.S. and other companies less dependent on the Canadian situation. As I explain in the Marijuana Matters editorial this week, the Liberals are looking more and more like losers in the election now less than seven months away. The winner is looking more and more like the party that ran on a dedicated anti-cannabis campaign. One term on the sidelines for the opposition Conservatives is not nearly long enough to completely erase deep seated negative feelings about cannabis.

Conclusion: We are undergoing a basic shift in our outlook for Canadian cannabis stocks focused on domestic markets. Those who follow The Cannabis Report Model Portfolio will see an increase in cash and a decrease in exposure to the Canadian cannabis operating arena. From our list, we continue focused on 1933 Industries (CSE: TGIF) (OTCQB: TGIFF), Khiron Life Sciences (TSXV: KHRN) (OTCQB: KHRNF), Lexaria (CSE: LXX) (OTCQX: LXRP) and Sunniva (CSE: SNN) (OTCQB: SNNVF).