Margin Debt Hits Record $1.3T as Consumer Sentiment Crashes

Margin debt rose 7% to a record $1.30 trillion in April, while the University of Michigan consumer sentiment index fell 10% to 44.8 in May, the lowest reading recorded by the survey. The margin increase followed a 10.4% gain in the S&P 500 in April and reversed two months of declines in margin balances.

Market data show margin borrowing has climbed more than 50% over the past year. Historically, margin debt and equity market levels have moved in parallel, with higher margin balances appearing near market peaks and lower balances near troughs.

The University of Michigan’s final May reading of 44.8 was below the preliminary estimate of 48.2 and represented a 10% drop from April. The decline was broad across political affiliations and was largest among lower-income households and respondents without a college degree. Both the current-conditions and future-expectations subindexes reached record lows.

Short-term inflation expectations in the Michigan survey edged up to 4.8% from 4.7%, the highest one-year outlook since August. Five-year inflation expectations rose to 3.9% from 3.5%, the highest level since October.

Equity benchmarks continued to advance despite the weak consumer readings. The S&P 500 posted its eighth straight weekly gain, up 0.9% for the week and trading close to its record high. The SPDR S&P 500 ETF Trust (SPY) also rose 0.9% for the week, while the Invesco S&P 500 Equal Weight ETF (RSP) gained about 2.5%.

Consumer-facing assets, including the Consumer Discretionary Select Sector ETF, are being watched for signs of spending patterns tied to sentiment. Fixed-income markets saw higher yields, with the 10-year Treasury finishing the week at 4.56% and the two-year at 4.13%.

The CME Group’s FedWatch tool showed roughly a 96% probability that the Federal Reserve will hold policy rates at the next meeting. Market pricing indicated a possibility of a 25 basis point hike later in the year, with some pricing focused on October, and little expected rate action into 2027.

Scheduled economic releases in the coming week include regional manufacturing indexes, the Case-Shiller and FHFA home price indices, the Conference Board’s consumer confidence reading for May, weekly jobless claims, the April personal consumption expenditures price index, a second estimate of first-quarter GDP, durable goods orders, personal spending, new home sales and the Chicago PMI.