Margin debt hit a record $1.42 trillion in May 2026, according to FINRA data. That’s an 8.5% jump from April alone and a 53.7% surge compared to the same time last year.
The leverage machine under the hood
Leveraged ETFs have swelled to roughly $179 billion in assets by mid-May. A full 85% of those leveraged ETF assets sit in just three sectors: technology, artificial intelligence, and semiconductors.
Nomura strategist Charlie McElligott flagged the mechanical risks embedded in this setup. Rebalancing flows from leveraged ETFs contributed over $100 billion in net buying over the prior month, with $38.1 billion flowing specifically into semiconductors. These products need to buy more of what’s going up and sell more of what’s going down, every single day. When things are rising, that creates a self-reinforcing loop of buying pressure that makes gains look more organic than they actually are.
McElligott noted that the combination of negative gamma from options positioning, leveraged ETF rebalancing, and volatility-control strategies has created what amounts to a fragile positive-feedback loop. Everything works beautifully on the way up. The problem is that the same mechanics work in reverse, and they work fast.
