Why 2022 will be another year of hurt for cannabis stocks

The echo chamber inhabited by retail cannabis investors and pump n' dumpers remains alive and well, but for how long?  

Many boosters ignore or forget that the fortunes of cannabis pubcos are inexorably linked with broader stock market sentiments and developments. And the general feeling among many non-cannabis commentators is that outlook for 2022 has turned decidedly bearish.  

What will negatively impact cannabis stocks?

1)    It is not a a good sign for the markets that the Fed will end its asset purchases in March 2022 and then start raising interest rates;
 
2)    On a historical basis, the S&P is very expensive right now (adjusted for the business cycle) trading at almost 40 times its earnings. As such, the broad market has more downside risk than upside potential;

3)    China’s ongoing tech clampdown, property-market troubles, opaque banking system and foreign policy shenanigans is testing global financial stability;

4)    Telltale signs of market decline are aplenty, including an influx of retail investors, a rush of initial public offerings, the poor performance of cannabis SPACs and the burst bubbles of speculative sectors like bitcoin and psychedelics;

5)    The lack of a clear path to US cannabis reform, LP profitability and market hiccups may finally have turned off many of their most diehard cannabis investors. 

Cannabis pubcos are not immune to these storm clouds. MSO and LP stocks may well continue to languish, and even decline in 2022. Keep your seat belt fastened.

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