Tramondo Investment Partners AG – Unter Altstadt 10 – Postfach CH-6302 Zug

Follow-up on Margin Debt

Follow-up on our “Notes From The Field” post in March 2021 – Margin Debt. 

Three months ago we highlighted the contrarian sentiment indicator that has flagged three major market tops (1972, 2000, 2007) since 1970. With the most recent data, the year-over-year change in margin-debt has risen above 55%. Once this threshold is exceeded, it is warranted to watch for a decline of the indicator as this signals that margin calls are being triggered and a (significant) deleveraging process has begun.

At Tramondo, monitoring the market sentiment in terms of margin debt levels is crucial to our hedging framework and belongs to our second pillar (out of four) “market sentiment”. Thus, one of our longer-term oriented indicators has changed from a yellow to a red flag and underpins the current buying frenzy and complacency of market participants.

Chart 1: Margin Debt April 2021
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About Tramondo

Tramondo Investment Partners AG is a bank-independent Swiss asset manager based in Zug and licensed by the Swiss Financial Market Supervisory Authority (FINMA) to act as an asset manager of collective investment schemes. The firm is a signatory of the UN’s Principles for Responsible Investment (PRI).

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Tramondo Investment Partners AG

Unter Altstadt 10
Postfach CH-6302 Zug

+41 41 710 76 76
info@tramondo.ch

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