U.S. margin debt rose again in December, extending a relentless climb in investor leverage to a record for the seventh consecutive month.
Data from the Financial Industry Regulatory Authority (FINRA) shows that debt increased 0.9% month over month to $1.23 trillion, marking the eighth straight monthly increase. On a yearly basis, margin debt is up 36.3%, showing how much investors relied on borrowed money during the latest equity rally.
The steady rise has occurred even as the S&P 500 has largely flattened near recent highs, a combination that historically has left markets more vulnerable to abrupt pullbacks.
The Peril Of Margin Debt
Margin debt represents money investors borrow from their brokers through margin accounts to purchase securities. As FINRA explains, Regulation T allows brokers to lend up to 50% of the purchase price of a stock at initiation, while FINRA maintenance rules generally require that equity …Full story available on Benzinga.com
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