Written on: August 18, 2017 | By Andrew Chorley |
Margin debt is one of a number of indicators often used when assessing Investors’ market confidence. Whilst this indicator is released at the end of every month, it is used by some to try and identify market movements looking forwards. The difficulty here is actually identifying whether that month’s results are the peak or just another stage on the way to a higher level.
Margin debt has a history of peaking right before financial collapses as demonstrated below in 2000 and 2008. When equities move lower, investors who are buying on margin often must pull out of the market, exacerbating the decline.
A number of analysts have suggested that the current levels of Margin Debt are exaggerated due to the historically low Interest Rates, which have significantly reduced the costs of borrowing.
On this basis it will be interesting to see the effect a tightening FED has on Margin Debt as borrowing costs increase.
On this day
18th August 1952 – Ricky Villa is born. Ricky became a Tottenham Hotspur legend when he scored the winning goal in the 1981 FA Cup Final Replay. This goal was awarded the Wembley Goal of the Century in 2001.
— Bloomberg (@business) August 17, 2017