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 increasing.
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.
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.