Investor lending in the U.S. market has reached a level historically indicative of rising financial risk.
Margin credit rose to $1.5 trillion in June, reports Adam Kobeissi, citing FINRA, NYSE and JPMorgan.
“This shows an increase of 3 consecutive months, + $ 281.2 billion, or + 23%. Margin debt has increased + $ 494.1 billion, or + 49%, in the last 12 months.
The increase reflects investors’ willingness to use borrowings at old rates to raise positions.
Such upgrades can magnify gains and losses when the markets are moving too much.
Kobeissi says several credit indicators are now shining.
“Currently, the ratio of investment funds, which subtracts the funds held in brokerage accounts from net lending, amounts to ~1.4% of the S&P 500 market, which is close to historical highs.
This is in line with the 2018 peak and surpasses the 2000 Dot-Com peak of ~1.1%. US sellers are out of luck. “
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