Investor borrowing in the US stock market has reached a level that historically indicates high risks in the financial system.
Debt margin rose to a record high of $1.5 trillion in June, Reports Adam Kobeissi, citing data from FINRA, NYSE and JPMorgan.
“This represents the third consecutive monthly increase, totaling +$281.2 billion, or +23%. Debt margin has increased +$494.1 billion, or +49%, over the past 12 months.
This increase highlights how investors are interested in using money borrowed at historical rates to amplify their positions.
Such high leverage can magnify gains and losses when markets move sharply.
Kobeissi says multiple marginal debt indicators are now flashing.
“Meanwhile, a broader measure of investor leverage, which subtracts cash held in brokerage accounts from total margin borrowing, comes to roughly 1.4% of the S&P 500 market capitalization, near the highest level on record.
This is in line with 2018 peak levels and exceeds the 2000 Dot-Com bubble peak of approximately 1.1%. American investors have never been more leveraged.
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