Goal: Understand how surges in NYSE margin debt historically precede or align with S&P500 turning points.
▪ What Larry Said
“Margin debt often surges near market tops. The emotional commitment of leveraged traders gives clues to potential reversals.”
▪ Chart showing Correlation
FINRA US Margin Debt vs S&P500
from https://www.advisorperspectives.com/dshort/updates/2025/07/23/margin-debt-surges-record-high-june-2025 by Jennifer Nash on 23 July 2025
Starting in 1997, a period well into the long-running bull market that began in 1982 and nearing the tech bubble, we can observe some interesting patterns:
- Late 1999 - March 2000: Margin debt experienced a dramatic increase, peaking in March 2000. This coincided with an interim daily high for the S&P 500, although the market's highest monthly close for that year occurred later in August.
- 2006 - July 2007: Another significant surge in margin debt began in 2006, reaching its peak in July 2007, just three months before the S&P 500 reached its peak.
- February 2009: Following the financial crisis, margin debt hit a low point in February 2009, the same month the stock market bottomed out. Subsequently, margin debt began another substantial period of growth.
- Post-COVID Pandemic (October 2021 - December 2022): We saw a similar pattern after the initial COVID-19 pandemic. Margin debt soared to an all-time high in October 2021, just two months before the S&P 500 reached its peak in December 2021. The market then bottomed in September 2022, and margin debt followed suit, reaching its most recent low in December 2022.
- Late 2023 - Early 2025: The most recent increase in margin debt began in late 2023 and continued into 2025. The S&P 500 reached its inflation-adjusted all-time high in November 2024, while margin debt reached a relative inflation-adjusted peak in January 2025.
- Now: Margin debt rose for a second straight month, now sitting at its nominal peak and 7.6% off its real inflation-adjusted peak from October 2021. Meanwhile, the S&P 500 is at its nominal and real peak.
▪ Chart Snapshot (July 2025)
▪ My Observations
- June/July 2025: Margin debt surging ~24.5% YoY (Larry observed that YoY 40% is the threshold) Continue to monitor monthly the YoY.
from https://ycharts.com/indicators/finra_margin_debt?utm_source=chatgpt.com