Margin debt climbed in June for the eighth straight month as investors continue to borrow on margin to buy stocks. Historically, peaks in margin debt as a percent of nominal GDP have preceded or coincided with peaks in the stock market. While this measure of leverage continues to make new all-time highs, today’s extreme level of margin debt is indicative of speculative appetite and elevated market risk. When margin debt as a percent of nominal GDP peaks and moves decisively lower it will increase the probability that a major top will be near or possibly already in place.
