Market Overview

Margin Credit Rips To New Highs

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Margin Credit levels have pushed new highs according to the latest data available from April. Data says credit rose to $507 billion from $476 billion.

Investor net worth, used to determine how well clients can cover their borrowed positions without having to sell assets, plunged to its worst level signaling extreme leverage from clients on the long side.

It's well known that margin credit does not significantly influence the S&P 500 price only index compared with other measures such as earnings and guidance. However, credit does offer a wonderful view into how prices will behave. Brokers have the benefit of the return on lending to clients as opposed to saving the money themselves.


By lending as much as they have, there is now a floor of longs in the market that will not sell, unless forced to do so. This is one aspect that is going uncovered nearly everywhere and a rate hike will certainly have an impact on the dynamics of this credit-broker-over leveraged client relationship.

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