Medium-GettyImages-1457928349

When markets crash, your mental health can too—here’s what you need to know

Jacob Falkencrone 400x400
Jacob Falkencrone

Global Head of Investment Strategy

Key points:

  • Stock market losses directly impact investors' mental health, increasing prescriptions of antidepressants and therapy visits.
  • Losses affect investors psychologically more strongly than gains, particularly among those aged 45–64.
  • Practical strategies like diversification, maintaining a long-term perspective, and seeking support can significantly mitigate emotional stress.


This content is marketing material.

In a year marked by sharp market swings, geopolitical drama, ongoing trade wars, and relentless volatility, even the steadiest investors might have found themselves feeling anxious, stressed, or downright miserable at times. Perhaps you’ve experienced the heavy feeling in your stomach when you check your portfolio after a particularly bad day, or the restless nights spent wondering whether you should sell, buy more, or just stop looking entirely.

New research has now shown that this anxiety isn’t merely imagined—stock market losses have tangible, measurable effects on mental health. A recent study titled “Stock Market and the Psychological Health of Investors” by Chang Liu and Maoyong Fan (2024) has provided compelling evidence that investors’ psychological health significantly worsens when their portfolios decline, especially in prolonged market downturns.

More than just numbers on a screen

The researchers analysed comprehensive medical records of millions of American investors and found that antidepressant prescriptions and psychotherapy sessions surged notably during periods when the stock market declined significantly. For example, a one-standard-deviation drop in local stock market returns led to an average increase of around 0.42% in antidepressant use. When markets crashed hardest, prescriptions spiked even more dramatically—revealing just how deeply connected our financial and emotional lives really are.

Notably, this wasn't just a result of general economic gloom or broader financial uncertainty—this was specifically linked to personal financial losses. Investors were directly impacted mentally by declines in their own portfolios, even if their jobs, wages, or the wider economy remained stable.

Why losses hit harder than gains

An important finding from Liu & Fan’s research is that investors are much more psychologically impacted by losses than gains. This aligns perfectly with behavioural finance theories around loss aversion—our human tendency to feel the sting of a loss far more acutely than the satisfaction of an equivalent gain. Simply put, losing EUR 1,000 hurts a lot more than making EUR 1,000 feels good.

Interestingly, this effect was most pronounced among middle-aged and older investors (aged 45–64). This makes sense, given that these age groups typically have larger portfolios and often view their investments as critical to retirement plans or other significant life milestones. A stock market crash isn’t just a setback—it's a threat to future plans, hopes, and security, magnifying its emotional impact.

Not irrationality, just human biology

The reality highlighted by this research is clear: if you’ve felt especially anxious or downhearted during recent market turmoil, there’s absolutely nothing irrational or weak about it. Market losses cause real stress, and this stress can translate directly into measurable psychological strain. To put it metaphorically: losing money on your portfolio isn’t like dropping a biscuit—it’s more like losing a beloved family heirloom. It’s emotional, it’s personal, and it deeply affects your mood.

Given the turbulent markets of 2025—dominated by trade wars between the US and the rest of the world, tariff escalations, geopolitical tensions, and multiple episodes of significant volatility—many investors have experienced precisely what this research captures. Headlines about “Market meltdowns” or “Trade war tensions” aren’t just news stories; for many, they represent very real threats to their mental wellbeing.

What can you practically do about it?

Awareness, as always, is the first and crucial step. Recognise and acknowledge how financial stress affects you emotionally. Here’s some practical, evidence-based advice that can help you manage the psychological toll:

1. Don’t react in the heat of the moment
Avoid making large financial decisions when emotions run high. Our worst decisions often come from panic or anxiety, not rational thought.

2. Stick to your long-term investment plan and diversify
If the volatility has been too much, it might indicate your portfolio isn't as diversified or balanced as you thought. Diversification doesn’t just protect your money—it protects your mental health too.

3. Talk to someone—anyone
Seek expert insights and analysis if you’re unsure about your strategy, or simply talk with a trusted friend or family member. Speaking openly about your anxiety often helps you feel more grounded and less isolated.

4. Remember you’re not alone, and markets have historically recovered
Markets have historically always bounced back—even after steep falls. Patience and a long-term perspective help protect not just your money, but your mental wellbeing too.

“Mental health is the real wealth”

This compelling research is a stark reminder that behind every stock chart and market statistic is a human being with hopes, fears, and real-life stresses. If 2025 has taught investors anything, it’s that investing isn’t just about returns—it's also about resilience, emotional intelligence, and wellbeing. As the saying goes, "your mental health is your real wealth". By understanding this powerful connection, we become not just smarter investors, but healthier, happier people too.

So, if you’ve felt the stress of this year's market volatility, know that you’re not imagining it—it’s genuinely hard. But equally important, know this: the stress you feel today won’t last forever. Like the markets, your emotional resilience can and will bounce back with time.

Until then, breathe, diversify, talk it out—and hang in there.

This article is based on the research paper “Stock Market and the Psychological Health of Investors” by Chang Liu and Maoyong Fan (2024).

 

 

Quarterly Outlook

01 /

  • Equity outlook: The high cost of global fragmentation for US portfolios

    Quarterly Outlook

    Equity outlook: The high cost of global fragmentation for US portfolios

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: Commodities rally despite global uncertainty

    Quarterly Outlook

    Commodity Outlook: Commodities rally despite global uncertainty

    Ole Hansen

    Head of Commodity Strategy

  • Upending the global order at blinding speed

    Quarterly Outlook

    Upending the global order at blinding speed

    John J. Hardy

    Global Head of Macro Strategy

    We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ...
  • Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Quarterly Outlook

    Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Jacob Falkencrone

    Global Head of Investment Strategy

  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

Disclaimer

The Saxo Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-hk/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo or its affiliates.


Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R

Saxo Capital Markets HK Limited (“Saxo”) is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo holds a Type 1 Regulated Activity (Dealing in Securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged Foreign Exchange Trading); Type 4 Regulated Activity (Advising on Securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products may result in your losses exceeding your initial deposits. Saxo does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo does not take into account an individual’s needs, objectives or financial situation. Please click here to view the relevant risk disclosure statements.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-hk/about-us/awards.

The information or the products and services referred to on this site may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and services offered on this website are not directed at, or intended for distribution to or use by, any person or entity residing in the United States and Japan. Please click here to view our full disclaimer.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc. Android is a trademark of Google Inc.