Investor borrowing in the U.S. stock market has reached levels that historically indicate increased risk throughout the financial system.
Margin debt rose to a record $1.5 trillion in June, reports Adam Kobeissi, citing data from FINRA, NYSE and JPMorgan.
“This marks the third consecutive monthly increase, totaling +$281.2 billion, or +23%. Margin debt has increased +$494.1 billion, or +49%, over the past twelve months.
The increase shows how interested investors are in using borrowed money at historic interest rates to strengthen positions.
Such high leverage can magnify both profits and losses when markets move sharply.
Kobeissi says multiple margin debt indicators are now flashing.
“Meanwhile, a broader measure of investor leverage, which subtracts cash in investment accounts from total margin lending, is about 1.4% of the S&P 500’s market cap, nearly the highest on record.
This is in line with 2018 peak levels and exceeds the 2000 Dot-Com bubble peak of ~1.1%. American investors have never had so much debt.”
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