Americans borrowed $112 billion more against their stock portfolios in May alone. That pushed margin debt to a record $1.42 trillion.
It was the second straight monthly increase. Add April’s gain and margin debt grew by $195 billion over two months. Over the past year it is up $495 billion, or 54%.
The S&P 500 was rising too. It moved above the 7,000 level and set records of its own, as VettaFi data showed margin borrowing running ahead of the market over the long run. Since 1997, real margin debt has climbed about 550.3%, while the inflation-adjusted S&P 500 has gained about 357.7%. Adjusted for inflation, May’s rise was 7.9% from April, and the year-on-year gain was 47.4%.
What past peaks looked like
Big jumps in margin debt have tended to show up near market turning points. Borrowing surged in the late 1990s and peaked in March 2000, as the S&P 500 neared its cycle high. It rallied through 2006 and peaked in July 2007, several months before stocks did. After the financial crisis it fell and bottomed in February 2009, the same month stocks hit their low.
The most recent high came in October 2021, followed by a decline through 2022 and a low in December 2022, shortly after the broader market downturn.
A separate market-data update put the May total at 6.2% of the M2 money supply, just under the 6.3% reached in the 2000 dot-com bubble. It said FINRA data showed margin debt growing 8.5% in May and linked the borrowing to the AI-driven rally, with investors using borrowed money to bet on technology stocks. Analysts quoted in the update warned that heavy leverage can force rapid selling if a downturn starts.
Rising margin debt often reflects investor confidence and strong momentum. The record data cited also show that fast increases in leverage have frequently come before stretches of heightened volatility.
Sources
- Market Alert: US Margin Debt Hits $1.4 Trillion as AI Tech Breakthroughs and Geopolitical Tensions Reshape Risk – Stock Market Watch
- U.S. Margin Debt Hits Record $1.42 Trillion as Borrowing Surges in May | KuCoin
- U.S. Margin Debt Reaches Record High as Borrowing Surges
