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BofA with the note:
A potentially bearish peak for margin debt in June 2021
Rising leverage tends to confirm US equity rallies. It is not new record highs for margin debt that we worry about. We get concerned when margin debt stops rising to suggest that investors have begun to reduce leverage. The S&P 500 (SPX) rallied 2.3% in July, but FINRA margin debt dropped to $844b (down 4.3%) from a record high of $882b in June. Although peaks in margin debt don’t always coincide with highs for the SPX, they tend to be bearish for equities.
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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific's leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
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