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Below is a chart and brief excerpt from today’s Market Situation Report written by Tier 1 Alpha. If you’re interested in learning more about the Hedgeye-Tier 1 Alpha partnership, there’s more information here. |
Margin debt refers to the funds an investor borrows from their broker through a margin account. Using margin can amplify gains; an investor can benefit from a stock's upside without fully funding the purchase, leading to increased profits (or losses).
FINRA's recent data for August indicates that margin debt decreased to $689.19 billion, marking the first decline since April. This represents a 2.9% drop month-over-month and a slight 0.2% increase year-over-year. Accounting for inflation, the debt level is down 3.3% month-over-month and year-over-year.
Notably, margin debt data is typically two weeks old when released. Hence, August's data becomes available in mid-September. Historically, margin debt closely tracked the market from 1997 to 2000 before surging. Post the tech crash; its growth became more measured until 2006, when it escalated again, culminating in a peak in summer 2007. Market highs often trail these peaks in margin debt, as evidenced in December 2021, which followed an October peak in margin debt. Notably, this latest market fall saw a shorter lead time, with margin debt peaking in August before the September market downturn.
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Learn more about the Market Situation Report written by Tier 1 Alpha. |
