LEVERAGE GUIDE
Margin debt and stock market bubbles
Margin debt is money investors borrow against securities in their brokerage accounts. It is both a measure of confidence and a source of forced selling.
014 MIN READ
Why acceleration matters
The dollar level naturally grows with the market and the economy, so the pace of change is often more informative. Rapid year-over-year growth suggests that risk-taking is accelerating rather than merely keeping up.
The feedback loop
Borrowing can lift demand and prices, which increases collateral values and enables more borrowing. When prices fall, the loop can reverse through margin calls and compulsory sales.
Read it beside valuation
Margin debt is not a standalone sell signal. Rising leverage is most concerning when valuations are already stretched and lenders and investors remain unusually relaxed about risk.