Bear markets can hurt your mental health

Downturns are linked to increased usage of antidepressants and psychotherapy sessions

Bear markets can be bad for your mental health. So says a new US study, Stock Market and the Psychological Health of Investors, which finds market downturns are linked to increased usage of antidepressants and psychotherapy sessions.

Negative psychological effects “intensify with higher levels of stock ownership”, it notes, with people aged 45-64 more likely to be affected than younger investors. Bear markets often coincide with economic downturns, but the authors found the increased psychological problems were driven by portfolio losses, not deteriorating economic conditions.

Stock ownership is common in America, with 58 per cent of Americans owning stocks and equities representing 41 per cent of all financial assets held by households. In contrast, positive stock returns don’t reduce antidepressant usage.

The authors link this to behavioural finance findings on loss aversion – losses loom larger than gains, so the pain of money lost greatly exceeds the joy of money gained.


There are also negative physical effects, with declining prices having “significant effects” on problems associated with depression, including insomnia, peptic ulcers and abdominal pains. Given that physical illnesses can drive long-term complications, the authors suggest the “true cost of stock market volatility” may be underestimated.