I had the great fortune of meeting Dr. Hunter S. Thompson, during a lecture he gave at Boston University in 1977 while I was there as a student.

Actually, it really wasn’t much of a “lecture.” The Gonzo Journalist, obviously a bit drunk, wandered onto the stage, eating a cheeseburger and drinking a bottle of Heineken, and in desultory fashion took questions from the scruffy audience for about 45 minutes.

When his appearance was over, I walked up to him, shook his hand, told him I admired his writing, and asked if marijuana would ever get legalized. “Yes, it’s inevitable,” he told me.

Fast-forward nearly 50 years, and here I am, writing about marijuana as a legal industry. Once a taboo, marijuana is currently legal for medical use in 24 states and the District of Columbia and for recreational use in 38 states and D.C.

Although weed remains banned at the federal level, I’m convinced that the removal of this prohibition is, as the late Hunter Thompson prophesied, inevitable.

Pot has become a consumer staple, enmeshed in the daily lives of millions of Americans.

That’s why pot stocks are not only growth investments but also inflation hedges. Yup, you read that correctly. While traditionally associated with volatility and regulatory uncertainty, cannabis equities have shown surprising resilience in the face of inflationary pressures.

Below, I delve into the unique characteristics of the marijuana market that render it an effective way to protect your portfolio from the ravages of inflation.

The inflation beast is stirring in his cage again. Just when we thought inflation was vanquished, we’ve been getting consumer price and producer price readings so far this year that have been beating expectations on the upside.

These inflation reports have spooked investors and raised concerns that the Federal Reserve will be hesitant to cut interest rates. The broader stock market has swooned and bond yields have spiked higher. The stock market rally could be in jeopardy,

As inflation once again creeps into economic conversations, investors are seeking refuge in assets that can withstand the erosive effects of rising prices.

Amid this search, an unlikely contender emerges: pot stocks.

Unlike many consumer goods, demand for marijuana remains relatively stable even as prices rise. The reason lies in the unique status of cannabis as a recreational and medicinal substance.

For millions of individuals worldwide, marijuana is not merely a discretionary purchase; it’s a household staple, akin to groceries or prescription medications. This dual utility endows pot stocks with a defensive quality that can shield investors from the worst effects of inflation.

One of the primary factors contributing to the resilience of marijuana demand is its essential role in medical treatment. For patients suffering from chronic pain, epilepsy, or anxiety disorders, cannabis is often a lifeline, providing relief when conventional medications fall short.

As inflation drives up the cost of health care, individuals reliant on medical marijuana are unlikely to reduce their consumption, regardless of price increases. This inelastic demand creates a stable revenue stream for cannabis companies, insulating investors from the full impact of inflation.

According to industry data and projections from the research firm Statista, marijuana revenue in the U.S. is expected to reach $42.98 billion in 2024. This growth is expected to continue at a compound annual growth rate (CAGR) of 2.89% from 2024 to 2029, resulting in a market volume of $49.55 billion by the end of 2029 (see chart).

In recent years, attitudes toward marijuana have undergone a significant transformation. This cultural shift has normalized cannabis consumption, eroding the stigma that once surrounded it and broadening its appeal across demographic segments.

As a result, demand for marijuana has become more resilient to economic fluctuations, with consumers viewing it as a legitimate lifestyle choice rather than a discretionary indulgence.

A growing number of countries and states are embracing legalization, recognizing the economic benefits of a regulated marijuana market. This regulatory momentum not only expands the addressable market for cannabis companies but also enhances investor confidence by reducing the risk of abrupt policy changes.

As inflationary pressures mount, the regulatory tailwinds propelling the cannabis sector provide a reassuring buffer for investors seeking stability.

For investors looking to capitalize on the inflation-hedging potential of pot stocks, a nuanced approach is essential.

Investors should spread risk across multiple cannabis companies with varying exposure to different segments of the market, including medicinal, recreational, and ancillary services. Diversification can mitigate the impact of individual company performance and sector-wide fluctuations.

In my premium trading service Marijuana Profit Alert, I look for companies with strong management teams, sustainable revenue streams, and a track record of innovation and adaptability.

I adopt a long-term investment horizon and resist the temptation to react impulsively to short-term market fluctuations. While volatility may present buying opportunities, focusing on the underlying fundamentals of quality cannabis companies can help weather temporary downturns and capitalize on long-term growth trends.

Crypto’s New Bull Market Has Started…

I regularly write about the opportunities in cannabis. But today, I want to emphasize the big profits that await you in crypto.

If you think crypto is too dangerous an investment, think again.

Consider this fact: the “blue chip” of crypto, Bitcoin (BTC), gained 156% in 2023. BTC and the broader crypto realm have engaged in a roaring bull market this year.

Every portfolio should have some sort of exposure to crypto. But you need to be informed, to make the right choices. Start receiving our FREE e-letter, Crypto Investing Daily. Click here now!

John Persinos is the editorial director of Investing Daily.

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This article previously appeared on Investing Daily.