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Margin Debt At Record Levels

By Louis P. Stanasolovich, CFP®, CCO, CEO and President of Legend Financial Advisors, Inc.®and EmergingWealth Investment Management, Inc. and Editor of The Global Investment Pulse

 

We have included two charts (both listed below) New York Stock Exchange (NYSE) Margin Debt and NYSE Margin Debt/NYSE Index which is a ratio.  The first chart indicates the total amount of margin debt on the NYSE is at its highest level ever.  However, that is looking at margin debt in isolation.  The second chart measures margin debt as a percentage of the value of the NYSE.  Yet it has only recently reached record levels.  This means that margin debt has risen with value of the NYSE.  Nevertheless, margin debt levels in both cases are similar to the market peaks of 1987, 1999/2000 and 2007. 

 

While these two charts do not signal the beginning of the end, they do signal that we are getting closer to a market top.  However, that could have been said in 1996.  Three more subsequent years of stellar returns occurred in 1997, 1998 and 1999.  The conclusion:  It is best to have a plan to defend one’s portfolio since we are closer to the end than the beginning.

 

 




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