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 is the sum investors borrow from brokers using a margin account, offering a leveraged position to potentially magnify returns. This method lets investors capitalize on a stock's upward movement without fully committing capital, thus enhancing potential rewards (or risks).

What Does Declining Margin Debt Mean for Markets? - 19

The latest data from FINRA for September highlighted a consecutive monthly decline in margin debt, settling at $680.85 billion. This represents a decrease of 1.2% from the previous month and an increase of 2.5% from the previous year. However, after inflation adjusting, the numbers dip to 1.5% month-over-month and 1.1% year-over-year.

We should also note that margin debt figures are usually a fortnight old when revealed. For instance, August figures are disclosed around mid-September. Historically, from 1997 to 2000, margin debt mirrored market trends, then rose steeply. After the tech bubble burst, its ascent was more gradual until a steep rise around 2006, reaching its high point in 2007. Peaks in margin debt often precede market highs, as observed in December 2021 which trailed an October margin debt peak. Interestingly, the recent market dip in September into October was on the heels of the margin debt peak in August.

Learn more about the Market Situation Report written by Tier 1 Alpha.


New Product Available | Introducing Portfolio Solutions

Attention College Students: Get Free Hedgeye Access

Hedgeye Education Center: Become A Better Investor

See all upcoming events at Hedgeye