Investors were hardly getting a buzz from marijuana stocks on Wednesday. Many titles in the sector were hit with sell-offs, including but by no means limited to Canopy Growth (CGC 2.41%), with its queasy 13% decline, and Cresco Labs (CRLBF 5.13%), which tumbled by nearly 6%.
The continued stagnation in a crucial government body was a key reason for the fall in the sector. Stocks in other sectors fared better on the day, with the S&P 500 index dropping a relatively benign 1.3%.
Congressional stagnation, no weed legalization
In order for the North American cannabis business to reach a much higher degree of viability, de facto legalization needs to occur in the U.S. There's a lot of support for cannabis rescheduling -- i.e., moving it to a less threatening category in the Drug Enforcement Agency's classification system -- on both the political level and among the public.
It's the first part of that equation that's stuck on zero. With the House of Representatives again failing to elect a new Speaker on Wednesday, no business in that chamber can be advanced. Unfortunately for weed investors, this includes the most recent House legalization proposal, the Marijuana Opportunity Reinvestment and Expungement (MORE) Act.
At the moment, legalization is only occurring at the state level. It's also happening piecemeal and often at a snail's pace. Given the support cannabis reform enjoys and the obvious and immediate benefits it would confer on basically every pot purveyor on the continent, it's the great hope of marijuana stock investors. No wonder these hopes were being dashed by the drawn-out Speaker fight.
Pot pessimism
That fight also doesn't look like it'll be resolved soon, with the main players being members of a fractured and combative Republican party. To weed advocates and pot company shareholders, this must feel like legalization is the prize that keeps moving ever further away.
