The Highlights
Stocks got hammered again this week, with the MSCI World Index falling 2.24% and the S&P 500 losing 2.50%. The S&P is off 10.61% from its July 7 high, which is formally a correction. Higher yields and mixed mega-cap tech earnings have driven the decline. Cannabis stocks continued their six-week slide. The US cannabis MSOS ETF lost 21.56% this week and is -46.93% since its high on September 15. The global YOLO ETF held up slightly better and lost a mere 15.26% over the last five sessions and is -40.72% since its peak in mid-September. Investor preferences have rotated and the names that went up the most in the rally are now suffering. The Cannabist (NEO: CBST, OTCQX: CBSTF) lost 50.77% this week, Jushi (CSE: JUSH, OTCQX: JUSHF) fell 41.94%, and AYR Wellness (CSE: AYR, OTCQX: AYRWF) lost 33.33%. Ascend (CSE: AAWH, OTCQX: AAWH) bucked the trend and rallied 12.64% due to preannouncing strong 3Q results—more on this later. The probability of federal reform is driving short-term pricing. While we wait for the DEA to respond to the HHS’ Schedule III recommendation, all eyes are on SAFER Banking. The bill is sitting in the Senate Banking Committee awaiting a Senate floor vote. While we are optimistic about passing the Senate, the probabilities in the House took a blow this week. Louisiana Republican Mike Johnson was voted new Speaker of the House on Wednesday, and he has not been kind to cannabis. He has an F rating from NORML, voted against The Medical Marijuana and Cannabidiol Research Expansion Act, and voted against SAFE Banking in 2019 and 2021. There’s a possibility SAFER could skip the House and be added to a must-pass year-end bill. While SAFER Banking has value, the rescheduling process remains more important. SAFER does not remove the 280E tax, which is the largest burden on the cannabis industry. On Thursday, a coalition of cannabis companies filed a lawsuit against the Attorney General seeking to block the federal government from enforcing cannabis prohibition against state-legal operators. Boies Schiller Flexner LLP is representing the case and we had Partner Joshua Schiller on Higher Exchanges this week. You can listen to the episode on Apple Podcasts, Google Podcasts, and Spotify.
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