Why record levels of margin trading could signal a looming market crash

A growing number of younger investors are using borrowed money to trade, pushing margin debt to unprecedented heights. This episode examines the risks associated with this trend and explores potential interventions by the Federal Reserve to stabilize the financial system.

Margin trading has reached an all-time high, exceeding $1.5 trillion. While this surge in leveraged investing is widespread, it is particularly notable among younger demographics.

Historically, periods characterized by high levels of margin debt have preceded significant market crashes. The episode investigates these past occurrences to understand the current danger and discusses what actions the Federal Reserve might take to mitigate systemic risk.

Source: How investing is getting riskier (Two Indicators) | Planet Money