New Executive Orders Boost Weed and Psilocybin ETFs

Open your mind.

It’s not just the advice of Kuato in the 1990 film Total Recall. The US is set to make psychedelic-assisted, mental-health treatments more accessible under a recent executive order. That means more investigational therapy using psilocybin and other drugs, which bodes well for the AdvisorShares Psychedelics ETF (PSIL). Perhaps unsurprisingly, that firm offered an endorsement of the order, calling it “a long-overdue step for patients, veterans and the clinicians caring for them.” It’s a segment of the market that could get more interest from investors. 

And, not to get too far into the weeds, but the acting US attorney general subsequently signed an order reclassifying marijuana as less dangerous, at least in states where it is licensed for medicinal use.

Not the Full Treatment

Legalization is not in the cards, at least not immediately. Cannabis proponents have long wanted more than what President Trump’s executive order late last year provided, which is downgrading marijuana to a schedule III drug that can be legally prescribed. “The view is that there’s been so much disappointment in terms of follow-through on this rescheduling,” said Tim Seymour, portfolio manager of the Amplify Seymour Cannabis ETF (CNBS) and Alternative Harvest ETF (MJ). “But this is the most notable reform on cannabis in decades. It’s happened.” 

There were some quick gains for the thematic ETFs just after the orders were published, but prices waned in the days afterward:

• PSIL jumped 19% at market open last Monday, which followed the April 18 executive order. As of close on Friday, the ETF remained up 6% from the time the order was published, and it was up 16% year to date. 
• Leading up to the attorney general’s order on marijuana reclassification Thursday, MJ and CNBS climbed 24% and 28%, respectively, over a day. They have since fallen closer to their prices before the news of the reclassification.
• The biggest fund in the category, the $1 billion AdvisorShares Pure US Cannabis ETF (MSOS), had a similar bump.

Spreading Like Spores: The Food and Drug Administration announced a series of regulatory actions Friday that could promote the use of psilocybin and other psychedelic drugs for mental health treatments. And the reclassification of medical marijuana could pave the way for more states to approve it, Seymour said. “This is the first of other dominoes to fall that are real policy breakthroughs. But there is no immediate road to banking, stock exchange listings or getting the adult [recreation use] market out into the same status,” he said. “There is still a lot more detail that the market is waiting for. Markets don’t like uncertainty of any kind, and this is uncertainty.”