What it is
US margin loans: what is measured, and why it matters
What it measures
Money US investors borrow from brokers to buy shares (Federal Reserve Z.1, quarterly); compared with its own 10-year average.
Why it matters
The more people borrow to buy shares, the more forced buying and selling there is when markets move; well above normal means heavy use of leverage.
Public substituteWe use this in place of “US margin debt (FINRA)”. FINRA data are the margin loans to customers that member brokerages report each month; the item in the Fed’s Financial Accounts for broker-dealers’ receivables from customers is quarterly and broader. Both measure how much investors borrow to invest in stocks, but their frequency and numbers differ. They measure similar things, but they are not the same number.
Compared with its own 10-year average; the FINRA margin debt figures often quoted in the news are measured differently and cannot be compared directly.
Where it stands now
Position over time
coldcoolneutralwarmhotHatched = earlier periods that were also hot
When it was here before
Earlier hot periods (7), plus the current one
US stocks after it began, cumulative1 yr2 yr3 yr
- Q2 1972–Q4 19723-quarter period, hot throughout1 yr+1.4%2 yr−15.0%3 yr−22.1%
- Q2 1978–Q3 19796-quarter period, hot in 4 of those quarters1 yr+10.1%2 yr+11.1%3 yr+45.0%
- Q4 19801-quarter period, hot throughout1 yr−8.0%2 yr+1.9%3 yr+28.8%
- Q4 1982–Q3 198720-quarter period, hot in 17 of those quarters · 1987 Black Monday1 yr+26.4%2 yr+24.2%3 yr+40.3%
- Q1 1997–Q3 200119-quarter period, hot in 17 of those quarters · 2000 Dot-com bubble1 yr+25.7%2 yr+63.0%3 yr+86.1%
- Q1 2021–Q1 20225-quarter period, hot throughout1 yr+20.6%2 yr+4.4%3 yr+26.9%
- Q2 20261-quarter period, hot throughoutBegan less than a year ago
For each period, the changes 1, 2 and 3 years after it began are cumulative and measured from its first month; “What happened next” is measured from every hot month, so the two give different numbers. The events named beside each period are major events of that time, not necessarily related to the readings here.
What happened next
How US stocks moved after earlier months with US margin loans hot
Bars: median cumulative changeEarlier quarters with US margin loans hot, excluding the current period (48)All quarters (221)
Median of the deepest drop below the starting month within the next 5 years: −9.9% for months with US margin loans hot; −6.0% for all months.
The hot months come from a small number of market episodes (7), and neighboring months are not independent events; rises and falls are all listed. This is the historical record, not a forecast. “US stocks” means the S&P 500 price index compiled by Professor Shiller (monthly average, excluding dividends).
Where US margin loans went next
| Median position | Back to neutral (40–60) | Still hot or more extreme | |
|---|---|---|---|
| 1 yr later | 85hot | 9% | 55% |
| 3 yr later | 45neutral | 23% | 28% |
| 5 yr later | 24cool | 5% | 11% |
Has hot or cold lined up with later returns?
No clear link in the past
1971–2021: average yearly change in US stocks over the next 5 years
There is no clear relationship between hot or cold and what came next. The gaps between the bars are not consistent across months (rank correlation below 0.25); this is a record of the past, not a forecast.
What it is linked to
Links involving US margin loans
No tested links currently involve this indicator.
Values
Values over time
Data and sources
Where the data come from and how they are calculated
- Source
- Federal Reserve Z.1 (margin loans owed by customers to brokers), via FRED (St. Louis Fed); public domain
- Frequency
- Quarterly
- Positions start
- Q2 1971
- Method
- Ratio: this month ÷ the 10-year average; position = the percentile of this ratio within its own history
- Unit
- USD billions
- License
- Open license, with attribution