Why Legal Cannabis Can Outlast a Recession

Posted by Mark Mariotti on May 27, 2019

While no one can predict exactly when a recession lies ahead, some experts say one is forthcoming. Sean Williams of The Motley Fool shares six signs that a recession may come soon. Those signs include the unemployment rate, yield curve, inflation, home sales, credit card debt and payments, and the economic expansion cycle.

The truth is that no business is recession-proof. However, it's possible to be resistant to recession. So, if a recession is right around the corner, what business could survive it? The legal cannabis business shows to be a strong contender. Furthermore, Williams says the marijuana industry qualifies as recession-resistant.

Vices Tend to Thrive During Recession

Cannabis was once illegal in the U.S. and Canada. It remains illegal in some states and it's still a drug. Though legal, people consider alcohol a vice. By that reasoning, marijuana counts as a vice.

Williams reviews the history of alcohol and tobacco sales. In short, alcohol and tobacco sales increased during the recession. The question is: How are people buying vice products when unemployment is higher, and they tend to hold on tight to their wallets? They do it by making lifestyle changes. Instead of paying $9 for a glass of wine at a restaurant, they buy a whole bottle from the store for the same amount.

A recession causes some to stress more and they turn to vices like alcohol. Cannabis is no different. Lest we forget, vices are addictive to the point that some can't quit. According to the National Institute on Drug abuse, up to 30 percent of cannabis users can't stop using even if they can't afford it. Instead, they purchase something cheaper or sacrifice buying something else.

More Reasons Why a Cannabis Business Can Survive a Recession

In the U.S., cannabis use in any form is completely illegal in only three states. Medicinal use is legal in 33 states and Washington, DC. The remaining 14 states allow products with cannabidiol (CBD). Lawmakers continue to draft bills for legalizing and regulating cannabis.

Alcohol, cigarette, and drug overconsumption can lead to death. What's so surprising is that the U.S. Drug Enforcement Administration says there have been no reported deaths from an overdose of cannabis. Additionally, an AP and NORC Center for Public Affairs Research survey finds 61 percent of those surveyed support the legalization of marijuana. In 2018, most Republicans supported its legalization, up almost 10 percent from 2016. In case you're wondering, 76 percent of the Democrats favor legalization.

All the data points to a bright future for the Cannabis industry. Even if a recession comes.

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