January’s Stock-Market Rally Revives Appetite for Risky Margin Loans - ABI

In the fourth quarter, investors trimmed the amount of margin debt they used to buy stocks at the fastest pace since the financial crisis. But some Wall Street and brokerage executives say those loan levels stabilized or moved higher last month as the S&P 500 rebounded, posting its best January performance since 1987, the Wall Street Journal reported. Margin debt, which is generally considered a gauge of investor confidence, tumbled more than $90 billion in the fourth quarter to $554.3 billion, the lowest tally since December 2017, according to the Financial Industry Regulatory Authority. Although the pace of the decline was jarring, analysts at Bank of America Merrill Lynch and other firms say that the pullback supports the case that the stock market has bottomed and is poised for a rebound — albeit with ongoing spikes in volatility — similar to other recoveries following drawdowns in February 2016 and September 2011.

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