Leverage Makes the Climb Look Easy Until It Doesn’t

What jumps out here isn’t just that stocks are high. It’s how they’re high. Market value and margin debt have been rising together, almost in lockstep. That tells you a meaningful chunk of this move isn’t just fresh savings or long term capital rotating in. It’s borrowed money leaning into the trade. That always feels fine when prices are rising because leverage is invisible on the way up. It only shows itself when something forces people to step back.

Why That Matters Right Now

Context is everything. Unemployment is quietly moving higher and inflation is fading more because demand is cooling than because policy won, then the economy underneath this market is getting softer, not stronger. In that environment, debt gets heavier to carry in real terms. That’s the part people tend to miss. Leverage works best when growth is accelerating and cash flows are expanding. It works worst when the economy slows and confidence thins out.

My View

The shaded bear market bands on this chart are the reminder of how this usually resolves. Margin debt doesn’t unwind gently. It unwinds because it has to. When prices stall or slip, lenders tighten, calls get made, and selling becomes mechanical instead of thoughtful. You don’t need a dramatic shock for that to start, just a market that stops rewarding risk the way it has been. My strongest takeaway is that this rally is being held together by confidence plus leverage at a moment when the macro backdrop is quietly deteriorating. That doesn’t mean an immediate collapse. It means the margin for error is thin, and when confidence finally wobbles, it tends to wobble all at once.