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You may think that investors use a lot less margin debt than in the past because of the increase in the use of put options to play the downside of stocks and ETFs.

However, margin debt has grown from $701 billion to $1.23 trillion since 2023.

Margin debt as a percentage of market cap of the stock market has gone from 1.6% to 2.3% $1.23 trillion over the last three years.

Tracking margin debt as a percentage of market capitalization is a classic “canary in the coal mine” for market analysts. Because the NYSE and NASDAQ combined represent nearly the entire US equity market, researchers often use the Wilshire 5000 or the S&P 500 as a proxy for total market cap.

Historically, FINRA (which took over reporting from the NYSE in 2008) provides the most reliable data starting from 1997. Below is a reconstructed table showing the approximate margin debt as a percentage of total US market capitalization (proxied by the Wilshire 5000 or S&P 500) over the last 30 years.

Historical Margin Debt vs. Market Capitalization (1996–2026)

*Data through early 2026 based on recent FINRA January reports.

Key Observations

• The 3% Ceiling: Historically, margin debt rarely exceeds 3% of the total market capitalization. When the ratio approaches or exceeds 2.5%, it is often viewed as a “yellow flag” indicating over-leverage and high speculative fervor.
• Nominal vs. Relative Peaks: While the current 2026 nominal debt is at an all-time high (exceeding $1.2 trillion), the percentage of market cap is still lower than it was at the peak of the 2000 and 2007 bubbles because the total market value has grown even faster.
• Forced Liquidation: The danger of high margin debt isn’t the borrowing itself, but the “feedback loop” it creates during a downturn. As stock prices fall, margin calls trigger forced selling, which further lowers prices and triggers more margin calls.

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