President Donald Trump's executive order directing the easing of federal marijuana restrictions is sending waves through the cannabis investment world, and one leveraged ETF is feeling the effects more than most.
The AdvisorShares MSOS Daily Leveraged ETF (MSOX) gives investors exposure to two times the daily total return of the AdvisorShares Pure US Cannabis ETF (MSOS), which means when the American cannabis industry moves, this fund moves twice as hard. And right now, it's experiencing some serious momentum shifts.
Momentum Score Jumps as Cannabis Speculation Heats Up
Here's where things get interesting. The momentum score measures the strength of a stock or fund relative to everything else in the market, calculated based on price movements and volatility across multiple timeframes before being ranked as a percentile. Think of it as a way to identify which investments are gaining traction and which are losing steam.
The AdvisorShares MSOS Daily Leveraged fund witnessed a remarkable surge in its momentum score, jumping from 25.11 to 80.25 within just one week. That's not a typo. This dramatic shift comes as speculation surrounding Trump's marijuana policy began building several weeks ago, triggering a rally across prominent cannabis stocks.
The timing makes sense. Investors started positioning themselves ahead of what they hoped would be a major regulatory shift that could open up the cannabis industry to more mainstream financial services and reduce federal restrictions that have hampered growth for years.
The Banking Problem Brings Reality Check
But here's the catch. The fund witnessed a steep 50.59% pullback on Thursday, following a 26.91% drop in the main fund. Why the sudden reversal? Trump's executive order lacked clarity on banking reforms that the industry had expected and desperately needs.
Cannabis companies have long struggled with basic banking access because marijuana remains federally restricted. They can't get traditional bank accounts or credit card processing in many cases, forcing them to operate largely in cash. Many investors had hoped Trump's order would address this fundamental problem, and when it didn't, the disappointment was swift and severe.
Despite the high momentum score, the fund currently shows an unfavorable price trend in the short, medium, and long term. It's a reminder that momentum can cut both ways, especially with a leveraged product that magnifies every move.
For investors watching the cannabis space, this ETF serves as a real-time indicator of market sentiment toward American marijuana companies. The dramatic swings this week show just how much uncertainty still surrounds the regulatory landscape, even with executive action from the White House.
