Does a New High in Margin Debt Mean The Market Has Peaked?

Margin debt hit a new high back February. The twitterverse was lit with hottakes about market tops and crashes.


Déjà Vu All Over Again

We went through this exact same exercise a year ago.

A new high in margin debt doesn’t mean the stock market has peaked or a crash is around the corner. It simply means the stock market has been going up. It’s a coincidence indicator. When the value of your portfolio increases you can borrow more on margin.

Tellingly, margin debt as a percentage of the S&P500 has remained the same as pointed out by Jake at Econompic

The absolute dollar amount of margin debt like the stock market will continue to go up until it doesn’t.