REUTERS/Carlos Osorio
A woman smokes a joint on the day Canada legalizes recreational marijuana at Trinity Bellwoods Park, in Toronto, Ontario, Canada, October 17, 2018
- The wave of global marijuana legalization in 2018 could have something to do with last year's highly volatile stock market, says Chuck Thompson, a socionomics analyst.
- When people derive a negative mood from market sell-offs, they begin to view recreational drugs as less dangerous, even innocuous, and vice versa, Thompson said.
- Many moments in history show a correlation between the fate of the US's cannabis industry and the performance of Wall Street.
- If the stock market sees a huge downturn in the next year or two, a proponent view on marijuana will reign supreme, he said.
The world's biggest stock bear has warned that the US stock market could plummet more than 50% from current levels, wiping out trillions of dollars of value. And while a bear market of that magnitude would be devastating for many, it could be favorable for marijuana supporters, according to a socionomics analyst.
Bear markets usually create a widespread negative social mood in the country, which makes people more tolerant of marijuana, according to Chuck Thompson, a researcher with the Socionomics Institute, which studies how social mood influences social attitudes and actions.
"During bear markets, people have a lot of problems going on," Thompson told Business Insider. "Their attitude is 'Hey, I'm not gonna worry about going after these marijuana users. I got enough problems of my own.'"
He says the wave of global marijuana legalization in 2018 could have something to do with the highly volatile stock markets last year. Trade wars, rising interest rates, and concerns of slowing economic growth resulted in a volatile investment environment late last year, with the stock market many times opening higher only to turn red in the afternoon.
And while 2018 was a difficult year for investors, it was a historic one for marijuana proponents. Canada and the state of Michigan legalized the recreational use of marijuana, and the US Congress passed the Farm Bill, which legalized hemp, a key source of the ingredient cannabidiol.
When people derive a negative mood from stock-market sell-offs, they start to view recreational drugs as less dangerous, even innocuous, Thompson said. And vice versa, during bull markets, people want to regulate the drug.
He pointed to several moments in history that show a correlation between the US's cannabis industry and the performance of Wall Street.
- In 1937, when the Dow Jones Industrial Average was soaring, Congress passed the Marijuana Tax Act, which banned the casual consumption of the drug, limiting its use for medical and industrial purposes.
- Between 1937 and 1942 the nation's mood soured ahead of the US's entry into World War II. During the final year of that period, Congress launched its "Hemp for Victory" campaign to encourage farmers to grow the crop for industrial purposes related to the war effort.
- In 1977, at a time when the social mood had been trending negatively for years and the stock market experienced a sharp sell-off, President Jimmy Carter recommended that Congress legalize possession of small quantities of marijuana.
- In 1989, after seven years of stock-market gains, President George H.W. Bush gave his famous "War on Drugs" speech.
- In November 2008, in the midst of the biggest bear market since the Great Depression, Massachusetts voters passed an initiative that decriminalized the possession of small amounts of marijuana, and Michigan voters passed a law loosening restrictions on medical marijuana.
The trends are likely to continue, according to Thompson: "Based on the research we have done, it will shift to favor legalization during the next huge downturn in the stock markets. That could be this year, or a year or two from now."
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