Short-term memory dysfunction is a key early feature of Alzheimer's disease (AD). Psychiatric patients may be at higher risk for memory dysfunction and subsequent AD due to the negative effects of stress and depression on the brain. We carried out longitudinal within-subject studies in male and female psychiatric patients to discover blood gene expression biomarkers that track short term memory as measured by the retention measure in the Hopkins Verbal Learning Test. These biomarkers were subsequently prioritized with a convergent functional genomics approach using previous evidence in the field implicating them in AD. The top candidate biomarkers were then tested in an independent cohort for ability to predict state short-term memory, and trait future positive neuropsychological testing for cognitive impairment. The best overall evidence was for a series of new, as well as some previously known genes, which are now newly shown to have functional evidence in humans as blood biomarkers: RAB7A, NPC2, TGFB1, GAP43, ARSB, PER1, GUSB, and MAPT. Additional top blood biomarkers include GSK3B, PTGS2, APOE, BACE1, PSEN1, and TREM2, well known genes implicated in AD by previous brain and genetic studies, in humans and animal models, which serve as reassuring de facto positive controls for our whole-genome gene expression discovery approach. Biological pathway analyses implicate LXR/RXR activation, neuroinflammation, atherosclerosis signaling, and amyloid processing. Co-directionality of expression data provide new mechanistic insights that are consistent with a compensatory/scarring scenario for brain pathological changes. A majority of top biomarkers also have evidence for involvement in other psychiatric disorders, particularly stress, providing a molecular basis for clinical co-morbidity and for stress as an early precipitant/risk factor. Some of them are modulated by existing drugs, such as antidepressants, lithium and omega-3 fatty acids. Other drug and nutraceutical leads were identified through bioinformatic drug repurposing analyses (such as pioglitazone, levonorgestrel, salsolidine, ginkgolide A, and icariin). Our work contributes to the overall pathophysiological understanding of memory disorders and AD. It also opens new avenues for precision medicine- diagnostics (assement of risk) as well as early treatment (pharmacogenomically informed, personalized, and preventive).