Chart o’ the Day: JP Morgan on Margin Debt

Posted by

Is there a stock bubble being fueled by margin debt?

We’ve been debating this topic for a few years now. JP Morgan Asset Management takes a look at the rate of margin debt growth versus the two recent bubble tops of 2000 and 2007. They pick up on important difference between now and then that looking at the aggregate amount of margin debt wouldn’t show you:

It’s apparent that there was a severe dislocation between the two in both March 2000 and July 2007, with margin debt growing almost 5 times faster than the equity market, indicating that investor exuberance was not linked to market fundamentals. Today’s market looks much different, with margin debt only growing 1% over 2015 and the equity market falling just 0.7%. While overall margin debt levels look elevated, the growth rate in relation to equity market movements indicates that investors are being much more prudent about margin debt and that we are not witnessing a market similar to 2000 and 2007.

and the chart:

Screen Shot 2016-02-22 at 10.45.09 AM

Source:

Weekly Market Recap
JP Morgan Asset Management – February 22nd, 2016

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.

What's been said:

Discussions found on the web
  1. Top Newsstuffs (February 22-28) | The Buttonwood Tree commented on Mar 09

    […] recovery from record lows, but still doubles prior records from 2000, 2007 & 2011 [See also: Margin debt & SPX growth rates in lockstep, Margin debt/NYSE ratio constant since 2007 & Margin debt/SPX ratio constant since 2007] […]

  2. Top Newsstuffs (March 28 – April 3) | The Buttonwood Tree commented on Apr 03

    […] recovery from record lows, but remains double prior records from 2000, 2007 & 2011 [See also: Margin debt & SPX growth rates in lockstep, Margin debt/NYSE ratio constant since 2007 & Margin debt/SPX ratio constant since 2007] […]

  3. Top Newsstuffs (May 2-8) | The Buttonwood Tree commented on May 08

    […] from record lows, but remains far above prior records from 2000, 2007 & 2011 [See also: Margin debt & SPX growth rates in lockstep, Margin debt/NYSE ratio constant since 2007 & Margin debt/SPX ratio constant since 2007] […]

  4. Top Newsstuffs (May 31 – June 5) | The Buttonwood Tree commented on Jun 05

    […] from record lows, but remains far above prior records from 2000, 2007 & 2011 [See also: Margin debt & SPX growth rates in lockstep, Margin debt/NYSE ratio constant since 2007 & Margin debt/SPX ratio constant since 2007] […]

  5. Top Newsstuffs (July 25-31) | The Buttonwood Tree commented on Jul 31

    […] from record lows, but remains far above prior records from 2000, 2007 & 2011 [See also: Margin debt & SPX growth rates in lockstep, Margin debt/NYSE ratio constant since 2007 & Margin debt/SPX ratio constant since 2007] […]

  6. Top Newsstuffs (August 22-28) | The Buttonwood Tree commented on Aug 28

    […] from record lows, but remains far above prior records from 2000, 2007 & 2011 [See also: Margin debt & SPX growth rates in lockstep, Margin debt/NYSE ratio constant since 2007 & Margin debt/SPX ratio constant since 2007] […]

  7. Top Newsstuffs (January 30 – February 5) | The Buttonwood Tree commented on Feb 05

    […] – Net margin balances (“buying power”): +9.5% mom, +1.4% yoy @ -$179.2B debit [See also: Margin debt & SPX growth rates in lockstep, Margin debt/NYSE ratio constant since 2007 & Margin debt/SPX ratio constant since 2007] […]

  8. Top Newsstuffs (June 5-11) | The Buttonwood Tree commented on Jun 11

    […] record high – Net credit (“buying power”): -7.3% mom, -62.6% yoy @ -$248.1B debit [See also: Margin debt & SPX growth rates in lockstep, Margin debt/NYSE ratio constant since 2007 & Margin debt/SPX ratio constant since 2007] […]

  9. Top Newsstuffs (July 10-16) | The Buttonwood Tree commented on Jul 16

    […] record high – Net credit (“buying power”): +3.0% mom, -64.6% yoy @ -$240.7B debit [See also: Margin debt & SPX growth rates in lockstep, Margin debt/NYSE ratio constant since 2007 & Margin debt/SPX ratio constant since 2007] […]

  10. Top Newsstuffs (August 14-20) | The Buttonwood Tree commented on Aug 20

    […] record high – Net credit (“buying power”): -0.9% mom, +79.6% yoy @ -$238.6B debit [See also: Margin debt & SPX growth rates in lockstep, Margin debt/NYSE ratio constant since 2007 & Margin debt/SPX ratio constant since 2007] […]

  11. Top Newsstuffs (September 18-24) | The Buttonwood Tree commented on Sep 24

    […] credit (“buying power”): -7.2% mom, -55.6% yoy @ -$255.9B debit; a new alltime low [See also: Margin debt & SPX growth rates in lockstep, Margin debt/NYSE ratio constant since 2007 & Margin debt/SPX ratio constant since 2007] […]

  12. Top Newsstuffs (October 16-22) | The Buttonwood Tree commented on Oct 22

    […] credit (“buying power”): -7.2% mom, -55.6% yoy @ -$255.9B debit; a new alltime low [See also: Margin debt & SPX growth rates in lockstep, Margin debt/NYSE ratio constant since 2007 & Margin debt/SPX ratio constant since 2007] […]

  13. Top Newsstuffs (November 13-19) | The Buttonwood Tree commented on Nov 19

    […] credit (“buying power”): -2.9% mom, -34.6% yoy @ -$266.0B debit; a new alltime low [See also: Margin debt & SPX growth rates in lockstep, Margin debt/NYSE ratio constant since 2007 & Margin debt/SPX ratio constant since 2007] […]

  14. Top Newsstuffs (November 27 – December 3) | The Buttonwood Tree commented on Dec 03

    […] credit (“buying power”): -16.0% mom, -48.1% yoy @ -$269.7B debit; a new alltime low [See also: Margin debt & SPX growth rates in lockstep, Margin debt/NYSE ratio constant since 2007 & Margin debt/SPX ratio constant since 2007] […]

  15. Top Newsstuffs (December 4-10) | The Buttonwood Tree commented on Dec 10

    […] credit (“buying power”): -16.0% mom, -48.1% yoy @ -$269.7B debit; a new alltime low [See also: Margin debt & SPX growth rates in lockstep, Margin debt/NYSE ratio constant since 2007 & Margin debt/SPX ratio constant since 2007] […]

HowIInvestMyMoney