Advisors split on future of marijuana asset class

The medical marijuana asset class is a budding area of the market. From assessing how Canada’s pot framework could affect companies in the space to estimating cannabis stock values, investment experts are busy figuring out whether to take part.

Read: Why this advisor is bullish on next year’s pot framework

Still, based on the Q3 2017 Advisor Sentiment Survey by Horizons ETFs Management (Canada), advisors aren’t yet sure about pot prospects. For the upcoming third quarter, the survey added the North American Medical Marijuana Index (which is tracked by the Horizons Marijuana Life Sciences Index ETF) and asked advisors for their expectations; the result was 34% are bullish, while 42% are bearish and 24% are neutral.

That’s not a surprise since “it’s probably too early to read sentiment into this sector, which is a highly news-driven space,” says Steve Hawkins, president and co-CEO of Horizons ETFs. “Many of the large medical marijuana stock producers have had very large returns over the last couple of years but saw a significant decline in May and June.”

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Aside from the marijuana asset class, the Horizons survey asked Canadian advisors for their expectations of returns for 14 other areas of the market.

Survey highlights include:

Advisors are most bullish on emerging market equities as represented by the MSCI Emerging Markets Index, with bullish sentiment on emerging markets increasing from 53% in Q2 to 60% for Q3.
The asset class with the biggest upside movement in bullish sentiment was volatility as measured by the S&P 500 VIX Short-Term Futures Index. A majority of Canadian advisors (59%) expect volatility to bounce back next quarter.
On the S&P/TSX 60 Index, only 40% of advisors are bullish on the Canadian blue-chip equity index, while 33% are neutral and 27% are bearish.
Canadian financial stocks, as represented by the S&P/TSX Capped Financials Index, saw one of the biggest sentiment increases of the quarter, as 54% of advisors offered a bullish outlook on financial stocks versus 37% last quarter.
On energy equities, as represented by the S&P/TSX Capped Energy Index, only 40% of advisors were bullish versus 47% last quarter. Further, bullish sentiment on crude oil fell from 44% last quarter to 40% this quarter – 28% were bearish and 31% were neutral. Advisors also showed uncertain sentiment on natural gas, with 50% neutral, 28% bullish and 22% bearish.
Sentiment on U.S. equities turned mildly positive compared to last quarter, with 53% of Canadian advisors bullish on the S&P 500 Index and 50% bullish on the NASDAQ-100 Index. Horizons says the S&P 500 saw returns rise last quarter, delivering a 2.57% return, and the NASDAQ-100 was also positive with a 3.88% return — despite a steep sell-off in the month of June, where it lost more than 2%.
On U.S. bonds, 52% of advisors were bearish on the S&P U.S. Treasury Bond 7-10 Year Index (total return), while only 16% were bullish.
Only about 37% of advisors were bullish on the loonie, whereas 32% were neutral and 31% were bearish.

In other news….

on Thursday, Arizona-based medical cannabis company American Green Inc. revealed its plans to buy all 80 acres of Nipton, a community in California. The Associated Press reports that the company wants to transform the old town into what it calls “an energy-independent, cannabis-friendly hospitality destination.”

AP adds that the town’s current owner, Roxanne Lang, said the sale is still in escrow but she confirmed American Green is the buyer. She declined to reveal price before the sale closes but noted she and her late husband, Gerald Freeman, listed the property at $5 million when they put it up for sale last year.

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