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Illustration: Eniola Odetunde/Axios

There might be times when stock market moves make sense, but this is not one of those times.

Why it matters: High and volatile stock prices, while mostly harmless, reflect the febrile zeitgeist more than they do fundamental valuations.

By the numbers: Shares of cannabis company Canopy Growth closed on Election Day at $20.46 apiece, valuing the company at $7.6 billion.

  • That evening, referendum results came in showing that recreational cannabis had been legalized in Arizona, Montana, New Jersey and South Dakota — a broad range of states, helping lay the groundwork for decriminalization at the federal level.
  • The following day, Wednesday, Canopy's shares dropped as low as $18.32 — down 10.5%.
  • By Friday, however, with no new news, the shares were as high as $24.98 — up 36% in 48 hours.
  • The cannabis rally continued into Monday, because something something coronavirus vaccine, even as Peloton was seeing its valuation slashed by a quarter in a single day.

The market euphoria on Monday was so extreme that hedge fund manager Bill Ackman was able to replicate exactly the same credit default swap bet, at exactly the same prices, that he made in February — the one where he turned $27 million into $2.6 billion in the space of less than a month.

  • The pandemic is much more out of control now than it was in February, and everybody knows how far prices can fall, because we saw them do just that in the spring. Yet Ackman's counterparties don't seem to have learned anything from their February mistake.

Between the lines: A lot of momentum trades got severely unwound on Monday, with moves as large as 15 standard deviations, according to Nomura strategist Charlie McElligott.

  • It was almost certainly a day where fortunes were made and lost at long-short hedge funds. As the Wall Street Journal reports, "value stocks beat expensive growth stocks by the widest margin of any single day since the 1930s."
  • Individual long-term buy-and-hold investors, however, were, as ever, perfectly fine ignoring the market entirely.

Go deeper

Gov. Northam: "It's time to legalize marijuana in Virginia"

Photo: Alex Edelman/Getty Images

Virginia Gov. Ralph Northam said on Monday he plans introduce and support legislation to legalize the recreational use of marijuana in the state.

The big picture: If Northam is successful, Virginia would join 15 other states and D.C. that have broadly legalized cannabis use.

Updated 6 mins ago - Politics & Policy

Sen. Kelly Loeffler to return to campaign trail after 2nd negative test

Sen. Kelly Loeffler addresses supporters during a rally on Thursday. Photo: Jessica McGowan/Getty Images

Sen. Kelly Loeffler's (R-Ga.) campaign announced Monday that she "looks forward to getting back out on the campaign trail" after testing negative for COVID-19 for a second time, following earlier conflicting results.

Why it matters: Loeffler has been campaigning at events ahead of a Jan. 5 runoff in elections that'll decide which party holds the Senate majority. Vice President Mike Pence was with her on Friday.

Updated 4 hours ago - Politics & Policy

Key government agency says Biden transition can formally begin

General Services Administrator Emily Murphy. Photo: Alex Edelman/CNP/Getty Images

General Services Administrator Emily Murphy said in a letter to President-elect Joe Biden on Monday that she has determined the transition from the Trump administration can formally begin.

Why it matters: Murphy, a Trump appointee, had come under fire for delaying the so-called "ascertainment" and withholding the funds and information needed for the transition to begin while Trump's legal challenges played out.