The dot-com boom is in full swing, with investors euphoric about their portfolio’s value soaring. But history suggests that a rapid rise in margin debt, like the recent $1 trillion all-time high, can be a warning sign for future market downturns.
In 1999 and 2007, similar warning signs were present before crashes of 2000 and 2008, respectively. Margin debt growth rates rose 18% between May and June, making it the fifth-largest increase on record. This fast-growing debt poses concerns that a downturn could accelerate if traders face margin calls.
However, investors should remember three things: (1) this is just one indicator in a complex market; (2) the market of 2025 differs significantly from those of 2007 and 1999; and (3) timing markets rarely wins. Bubbles can persist for time, making it essential to invest in solid companies with long-term potential.
Investors should focus on diversifying their portfolios, as this provides confidence and peace of mind during market ups and downs, including the big ones.
Source: https://www.fool.com/investing/2025/09/13/this-1-trillion-wall-street-warning-is-flashing-re