Investing.com -- Margin debt has increased by more than 40% over the past 12 months, reaching levels previously observed only at market peaks in 2000, 2007, and 2021, according to data from Leuthold Group.

Margin debt, which represents money investors borrow from brokers to purchase stocks using existing securities as collateral, stood at $1.4 trillion in May, the most recent month available, according to data from Finra. The borrowing mechanism increases buying power and potential gains but can also increase losses.

The growth rate of margin debt has outpaced S&P 500 returns significantly. The S&P 500 has returned approximately 22% over the past year, including reinvested dividends, which is roughly half the rate of margin debt growth.

"Today's 54% absolute margin debt growth, and 26% excess margin debt growth over the last 12 months both exceed the historical trigger points in our study," Leuthold wrote. The firm noted that historically, "neither series spends much time above the threshold."

When margin debt growth has reached similar levels in the past, returns in the S&P 500 have historically declined over a one-year period.

The increased risk appetite is also visible in the growth of speculative, leveraged ETFs. During two months last spring, assets in those funds nearly doubled.