The latest monthly margin debt statistics are out from FINRA. So it’s worth looking at an updated chart of the aggregated stock market leverage.
Below we share a chart that shows the combination of net margin debt, net leveraged ETF AUM, and net speculative futures positioning.
Note that these are all in nominal terms. The aggregated total comes in at around $400 billion.
This represents 1.7% of market cap when equalized for S&P 500 (NYSEARCA:SPY). This happens to be a record reading. The Nasdaq dot-com bubble peak came in at 1.1% when it topped).
The trouble with using this as a timing indicator is that just when it reaches new heights, it can technically move higher yet.
From a timing standpoint, it’s important to look at the acceleration/deceleration of margin debt – i.e. when leverage is accelerating too quickly or rolling over (decelerating). Right now, we are seeing neither.
So while it’s moving into frothy heights, it’s better to focus on the acceleration/deceleration factor… similar to high valuations.
Twitter: @Callum_Thomas
Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
