“Investors are still making rash, knee-jerk decisions off of little more than a hope and a prayer,” says Portfolio Manager
On the back of speculation that President Donald Trump might ease federal restrictions on marijuana and open the door to federal legalization in December, the shares of major US-listed marijuana producing companies like Tilray Brands and Canopy Growth rose significantly, in certain cases over 50 per cent. When Trump signed an executive order on December 18th, however, it was far more muted than many investors expected, focusing more on medical legalization and not moving the needle much on recreational use. Those same pot stocks subsequently gave up most, if not all, of the gains they’d made in the leadup to this order.
“Investors are still making rash, knee-jerk decisions off of little more than a hope and a prayer. And a sober second thought does tend to creep in at some point with these rash decisions most of the time,” says Josh Sheluk, Portfolio Manager at Verecan Capital Management.
Sheluk explained some of why this sector, which many Canadian investors and advisors struggled with in the late 2010s, continues to play host to these quick booms and busts. He outlined, too, how the wider role of policy changes and risks may play out on markets this year, opining on whether markets are still at risk of Trump-induced volatility or if 2025 proved enough to build some immunity for investors.
This latest boom and bust, Sheluk says, was likely driven by retail investors. However, he notes examples from his own experience in the more sustained hype around marijuana stocks in Canada between 2015 and 2018 to say that some institutional players and advisors have jumped on the pot bandwagon before. Even when companies offer little in the way of compelling fundamentals, he notes that the sector generates excitement.
That excitement, Sheluk notes, comes down to a view that a single decision can open up a whole market. Legal status can change in an instant and, when it does, new businesses can open and grow. Sheluk argues, though, that this simple and easy narrative has failed to tell the whole story for pot stocks. The Canadian experience has shown that blanket realization and an overabundance of excited investors can actually be bad for these companies. The Canadian pot stock crash saw many of these companies come down 90+ per cent from their peaks, as investors discovered how hard it is to make a profit in a commodity business with low barriers to entry.
Even the case for pot stocks as a pharma play doesn’t compel Sheluk. He argues that the promises of marijuana-derived products like CBD remain largely speculative and, more importantly, will lack the R&D backup and patent protection that underpins profitability in the pharmaceutical sector.
The specific nature and lessons of the marijuana industry may be at the forefront of this story, but underpinning it is also a wider theme that advisors need to stay cognizant of in 2026: policy risk. December’s quick boom and bust was driven by executive action on the part of the Trump Administration, and if the collective experience of 2025 was any indication, US policy will continue to impact markets, though some investors may be starting to inoculate themselves.
“I think there will probably continue to be pockets of this, let's just call them policy-driven spikes or crashes in certain areas. But we're also at the same time, in some senses, seemingly getting a little bit more immune to some of the commentary as well,” Sheluk says.
Sheluk notes the example of tariffs, which crashed the market in April. Six months later and new tariffs have largely been greeted with a shrug by investors. However, new policy developments like this marijuana executive order have resulted in some spikes and crashes as well. Certain sectors, he says, will carry policy risk while others prove capable of skipping them.
For advisors seeking to navigate policy risks in 2026, Sheluk argues that they may want to practice a judicious approach to the news. While staying informed of broad themes is important, there is simply too much uncertainty around which policies will have meaningful impacts, which will prompt short-term volatility, and which will be ignored altogether.
“From an investment perspective, the number of political events and actions that actually lead or can lead to a tangible, informed investment decision are few and far between. So I think, for the most part investors and advisors would be much better off just ignoring the vast majority of what they hear on the political front,” Sheluk says. “What really drives stock prices over the longer term, and the fundamentals of companies, is the profitability of those companies. It's not clear how any of these policy decisions will affect that.”
