Is Stocks' Plunge Affecting Your Mood? It Could Be "Dow Affective Disorder

Barron's article March 18 2020 by Al Root

People’s moods can suffer as the stock market declines. Anyone with significant experience in the market can attest to that fact: No one likes losing money, and everyone likes making it. But in the most extreme cases, stock-market gyrations can lead to Dow Affective Disorder, or DAD.
Investors shouldn’t dismiss the idea out of hand. Staying happy in this market is hard.

The Dow Jones Industrial Average and S&P 500 are both in bear market territory, down more than 20% from recent highs. The Dow dropped almost 3,000 points, or 13% on Monday, only to rally 5.2% Tuesday. In fact, the Dow has moved more than 5% for seven consecutive days. The volatility has been extreme.

“A person with ‘Dow Affective Disorder’ experiences bipolar swings in mood as the market moves up and down,” wrote psychologist Martin Klein in a February blog post. “In a bull market they feel elated and invincible. They may spend freely, even to the point of living beyond their means.” But then comes the fall, which can lead to depression and anxiety.

“I’ve dealt with a lot of people on Wall Street,” Klein tells Barron’s. Most people only glance at the value of their portfolio on a monthly or quarterly basis. The problems start when checking stock prices becomes compulsive. “Stock performance can be how some value themselves as people,” he said.

DAD is his term for stock swings affecting moods. It isn’t official. There are, of course, mood disorders based on things beyond people’s control. SAD, or seasonal affective disorder, for instance, is a recognized condition.

A ton of research is done into money and happiness. It’s hard to draw sweeping conclusions, but research has coalesced around the idea that to be happy, people need enough money to live, a purpose, and loving relationships.

DAD falls under the first of those criteria. Maybe people view stock- market drops as an existential threat to financial security.

The symptoms of DAD, according to Klein, look like those in other depressive disorders: stomach pain, back pain, neck pain, as well as an inability to sleep or a decrease in libido. If people are going through that, Klein wants them to ask for help.

“Severe emotional ups and downs are harmful to long term health,” he says. In the case of DAD, the ups and downs can hurt the pocketbook, leading to panic selling—in environments like the Covid-19 coronavirus selloff—or to euphoric buying at market tops.

Klein received his Ph.D. from the California School of Professional Psychology at Berkeley in 1986. He was an assistant professor of psychiatry at Yale School of Medicine before setting up private practice in Connecticut.