Investor borrowing in the US stock market has reached a level that historically signals elevated risk across the financial system.

Margin debt climbed to a record $1.5 trillion in June, reports Adam Kobeissi, citing data from FINRA, NYSE and JPMorgan.

“This marks the 3rd consecutive monthly increase, totaling +$281.2 billion, or +23%. Margin debt has surged +$494.1 billion, or +49%, over the last 12 months.

The surge highlights how interested investors are in using borrowed funds at historic rates to amplify positions.

Such high leverage can magnify both gains and losses when markets move sharply.

Kobeissi says multiple margin debt indicators are now flashing.

“Meanwhile, a broader measure of investor leverage, which subtracts cash held in brokerage accounts from total margin borrowing, is up to ~1.4% of the S&P 500 market cap, near the highest on record.

This is in-line with the 2018 peak levels and exceeds the 2000 Dot-Com bubble peak of ~1.1%. US investors have never been more leveraged.”

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