US Margin Debt Nears Dot-Com Bubble Record, Flashing Leverage Warning
U.S. margin debt as a share of M2 money supply hit 6.2% in May, just shy of the 6.3% record set during the 2000 dot-com bubble. The elevated leverage signals heightened investor risk and potential for sharp declines if sentiment shifts.
U.S. margin debt reached 6.2% of the M2 money supply in May, approaching the record 6.3% seen at the peak of the dot-com bubble in 2000. This indicator measures the extent to which investors borrow to buy stocks—a form of leverage that amplifies both gains and losses.
When margin debt is high, a market downturn can trigger margin calls, forcing leveraged investors to sell assets and potentially accelerating declines. While not a precise timing tool, the near-record level is closely monitored as a warning sign of market vulnerability.
The data suggests that investors are heavily exposed, raising the risk of forced selling if sentiment deteriorates or volatility spikes.
Source: First Squawk