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The Stock Market Had a Terrible Year. These Americans Aren’t Bothered.

Many Americans didn’t have to resist that compulsion: They aren’t in the market for the long term. They aren’t in it at all.

According to a Gallup survey from this spring, 41% of Americans say they have no money invested in the stock market. Many of them can’t afford to invest: 75% of those with a household income under $40,000 a year say they have no investments, per Gallup. For others, it is a choice: 11% of Americans with a household income of at least $100,000 a year have nothing in stocks.

Arlene LaHera, a 65-year-old in Port St. Lucie, Fla., said she can’t think of a time when the market’s ups or downs affected her life. She hopes, for others’ sake, that the market recovers soon, but she has no investments, and she said, “on a personal level, it just seems to be a little bit distant.”

Mrs. LaHera, who makes a living selling a medical device she invented, said that she doesn’t have spare cash to invest. But even if she did, she couldn’t stomach the market’s violent swings. A friend’s experience with day-trading only validates her feelings.

“He’s always a wreck over his day-to-day trades,” she said. “I’d rather have some kind of a normal level of happy all the time rather than the severe ups and downs.”

Arlene LaHera said she hopes the market recovers soon for others’ sake, ‘but on a personal level, it just seems to be a little bit distant.’ Alfonso Duran for the Wall Street Journal

The stock and bond markets have historically provided a reliable route to building wealth, but some non-investors don’t recognize its upside or think there are better alternatives. Research suggests this year’s bear market is unlikely to change their minds. One study found that between 1960 and 2007, the more recently someone lived through a year of low stock-market returns, the less likely he or she was to have made any investments at all.

Many investors who won’t need to sell off their holdings for decades, and can reasonably expect them to grow in the long run, have nevertheless been rattled by the recent run of losses.

“I’ve had a lot more conversations with clients expressing concern and asking questions that suggest they are considering walking away from a portion of the markets,” said Joshua Escalante Troesh, a financial adviser in Rancho Cucamonga, Calif. He has counseled all of them to stick with their long-term strategy and not sell.

Some with the means to invest prefer to funnel their money elsewhere. Michael Mitchell, a 38-year-old high-school teacher in Statesville, NC, could afford to put money into the market but instead has been building up his savings to pay off the remaining $93,000 of his mortgage. He hopes to do so in a couple of months, wiping out the next 18 years of mortgage payments all at once.

When stocks climbed in the years after the financial crisis, Mr. Mitchell grew frustrated that his pay stayed flat as the economy improved, and it felt like none of the gains reached him. He came to feel indifferent about whether the market went up—or, nowadays, down. “If I had $1 million in the stock market, I’d probably be a lot more concerned,” he said of the recent market gyrations. He doesn’t have a 401(k), but as a public-school teacher, he will receive a pension.

Michael Mitchell, a 38-year-old high-school teacher in Statesville, NC, has been saving up to pay off his mortgage in full rather than investing in the stock market.


Michael Mitchell

Mr. Mitchell said he gives priority to financial stability and living within his means, and is opting not to invest, for now. He considers himself frugal and drives a 2001 Honda Accord. Whatever might happen in the stock market, he said, “I still save my surplus earnings, I spend time with people I care about, I do what I love for a living, and I don’t live a life of either extravagance or of trying to keep up with my wealthier neighbours.”

The stock market might not be the economy, but its fluctuations touch the lives of Americans whether they are invested or not.

“As the stock market goes down, households that have stocks, their wealth goes down, and then they spend less,” said Alp Simsek, a professor of finance at the Yale School of Management. Firms then face lower demand and, in turn, make fewer hires or reduce workers’ hours. Mr. Simsek, along with other researchers, estimates that through this chain of events, a 20% drop in the market can lead to a hit of 1.7% or more to workers’ aggregate income two years later—”not a huge effect, but it’s sizable ,” he said.

On a shorter time scale, one UK study found that the more stocks fell over periods of six months or a year, the lower the levels of mental well-being reported afterwards by investors and noninvestors alike. Another study, by two finance professors in California, found that on days when stocks fell, hospital admissions for psychological conditions such as anxiety and depression rose slightly statewide. To name an extreme example, on the day of the 1987 crash known as “Black Monday,” hospital admissions, psychological or otherwise, shot up to 5% above average.

Paying attention to the stock market can be worthwhile for noninvestors, according to Wendy Edelberg, the director of the Hamilton Project, an economic research group at the Brookings Institution. While many day-to-day market movements have little broader meaning, she said, the way the market responds in the moment to economic news, such as a strong employment report or new inflation data, can be revealing of what financial analysts think lies ahead for the economy.

Alberto Meza, 61, of Hawthorne, Calif., has never invested in the stock market and said that growing up, his parents never talked about investing.


Alberto Meza

Many non-investors don’t draw links between the market and their everyday lives. “It certainly doesn’t seem to affect anything I do,” said Alberto Meza, a 61-year-old construction worker in Hawthorne, Calif., who hasn’t invested in stocks himself. (Mr. Meza has a retirement plan through his union, but he said it hadn’t occurred to him that this means the union might have money invested on his behalf.)

Mr. Meza supposes that he could have afforded to invest small sums himself over the years, but he never seriously considered it. “I was born poor, raised poor,” he said. “It was nothing that anybody I know, like my parents—they never talked about the stock market.”

For Mr. Meza, seeing news of the market’s latest flailing doesn’t come with the sting that an investor might feel—it is like hearing that a football team he doesn’t care about, such as the Cincinnati Bengals, lost a game.

“It’s bad news for investors, I guess,” he said. “It’s not bad news for me.”

Write to Joe Pinsker at joe.pinsker@wsj.com

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