U.S. investors borrow $1.53 trillion to buy stocks, leveraging up to chase all-time highs I’ve been talking about how Korean retail investors are using leveraged ETFs, margin accounts, and CFDs to take over foreign capital sell-offs. Now, the U.S. market is facing the same issue, but on a larger scale with broader leverage distribution. As of June, the net credit balance in U.S. brokerage accounts dropped by about $70 billion in a single month, hitting a record low of negative $1.061 trillion. Meanwhile, margin debt increased by approximately $86 billion, reaching a record $1.53 trillion, marking the third consecutive month of growth. Net credit balance can be understood as the cash and credit balance in investors’ brokerage accounts after deducting margin debt. Now that it’s fallen to negative $1 trillion, it shows that investors have less cash buffer and are increasingly relying on borrowed funds to maintain their stock positions. Compared to the bear market low in 2022, the U.S. net credit balance has deteriorated by about $800 billion. Behind this round of U.S. stock market gains, aside from corporate earnings, the AI narrative, and index fund inflows, the increase in margin financing has been a key driver. Currently, leverage in the Korean market is mainly concentrated in products related to Samsung Electronics and SK Hynix, while leverage in the U.S. market is widespread across the entire brokerage system. Korean retail investors are leveraging up to take over foreign capital sell-offs, while U.S. investors are borrowing more money to expand their stock positions as indices continue to rise. During an uptrend, rising stock prices boost account net values, giving investors access to more margin. New loans then flow into the stock market, creating sustained mechanical buying pressure. However, when the market weakens, account net values drop, margin requirements increase, and investors are forced to add cash or sell stocks. The margin financing that once fueled the rally turns into mechanical selling pressure. In simpler terms, U.S. investors are using less and less cash to maintain increasingly larger stock and margin positions. The Korean stock market has already shown the side effects of high leverage. Leverage amplifies capital inflows during an uptrend but accelerates deleveraging during a downturn. The U.S. stock market is currently facing both high valuations and high margin financing. If new capital inflows slow down, the increasingly large margin positions could directly amplify market volatility. @Gate Crypto, U.S. stocks, Hong Kong stocks, Korean stocks, gold, CFDs, prediction markets all-in-one trading platform