According to Bloomberg, NYSE margin debt surged from $182 billion to $505 billion in the six years ended in June 2015, roughly tracing the trajectory of the S&P 500, which tripled over the period. The biggest gains came in 2013, with credit rising 35 percent as U.S. stocks climbed 30 percent for the best returns in 16 years.
Since June, it’s been the other way around, with margin debt falling 6.3 percent to $473 billion at the NYSE’s last update, which covered August. The S&P 500 slid 4.4 percent at the end of that period as stocks entered a correction.
Margin debt, compiled monthly by the NYSE, represents credit extended by brokerages for clients to buy stock. It hews closely to benchmark indexes such as the S&P 500, primarily because equity is used to back the loans and as its value rises, so does the capacity to lend.
Could The Fed’s asset bubble tactic be running out of juice?
Don’t worry Stanet (Janet Yellen and Stan Fischer)! House prices are plenty frothy!
Warning Janet Yellen!