The average Joe investor jumping into this bull market using exchange-traded funds and borrowed money may end up leading to its undoing, one prominent Wall Street firm said.
"US retail investors represent the main vulnerability for equity markets if geopolitical tensions escalate from here," JPMorgan strategist Nikolaos Panigirtzoglou wrote in a note to clients Friday. "Over the past year, they have invested in equity markets not only via ETFs but also via buying individual US equities in leveraged form."
The strategist cited how the equity allocation of US household assets rose to 34.9 percent at the end of the first quarter, which is higher than the previous peak of 34.6 percent in the first quarter of 2015, according to JPMorgan analysis.
In addition, he noted the NYSE net debit balance of margin accounts, which is a measure of how much leverage individual investors are using for their stock investments, has been "rising over the past year and the current reading is very close to the record highs seen in mid-2015 or in early 2000."