SPDR S&P 500 (SPY)

[tw0122]

September, margin debt – the amount individuals and institutions borrow from their brokers against their portfolios to increase leverage – fell by $9 billion from August to $556 billion, according to FINRA today, after having already dropped $37 billion in August, which puts the margin-debt level back where it had been at the end of December 2018, after the historic plunge in margin debt during the October-December stock-market rout.

At the end of last month, margin debt was down by $92 billion, or 14%, from a year ago, and down by 17% from the peak of $669 billion in May 2018. These investors are deleveraging.



Over the long term, the patterns emerge. Obviously, with a chart spanning decades, such as the chart below, the absolute dollar amounts are less relevant since the purchasing power of the dollar has dropped over the period. What is important are the movements, and how they relate to stock market events, which I indicated in white.

Margin debt is now back where it had first been in April 2015: