S&P 500 vs Margin Debt Change





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Inflation and interest rates are on the rise and investors are concerned.

Why?

One reason (of many) is that there is a significant amount of debt and the cost to carry that debt is going up.

For some perspective, take today’s chart which overlays the 24-month change in inflation-adjusted margin debt on top of the inflation-adjusted S&P 500.

Conclusion…

The stock market has tended to struggle soon after a surge in margin debt.

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S&P 500 Gain vs Margin Debt Change

What is margin debt?

Margin debt is money borrowed from a broker for the purpose of buying stock.

What is a margin call?

A margin call refers to a broker demanding that an investor deposit additional money into their margin account to meet the required minimum.