This week we are excited to introduce video to our investment updates. We intro the series and discuss plans for the future. For today, Will answers the question of what is margin debt and why we need to pay attention to it.
In past stock market peaks, margin debt has also peaked. This makes sense as high margin debt indicates extreme confidence from investors that they can earn higher returns from the market than the interest rate they are paying to borrow the funds. Typically this confidence comes after a significant stock market advance. Today, with the stock market at record highs, margin debt is once again hitting a record high. Does this mean the market is facing a sharp decline? One indicator alone can not tell us but certainly the high level of margin debt is something to keep a close eye on.