Recession Investing and Cannabis / Vice StocksInvestors looking for recession proof stocks may be considering these studies. Combined with the expected release of infused drinks and edibles we may be seeing optimism coming back into the sector.
Quote: Merrill Lynch recently examined the performance of alcohol, tobacco and casino stocks in all recessions since 1970 and found that while the S&P 500 fell by 1.5% on average, sin stocks raised on average 11%.1
The recent downturn is not shaping up to be any different. For sure, people are cutting their spending far more than in the past recessions, but history shows that people do not drop their bad habits in hard times. Instead many people feel an intense need to escape through alcohol, tobacco, or a trip to their local casino.
Habits are persistent especially for addictive substances and gambling, so demand does not respond much to the price changes, taxes or etc. When people are depress, for instance, losing their jobs or facing financial hardship in recessions, they increase their consumption of drugs and gambling. This means the demand for vice products is countercyclical, i.e. increases in recessions.
Link to full study: https://core.ac.uk/download/pdf/56366387.pdf