Using high-frequency identification, we investigate leverage of the firm and economy-wide leverage as determinants of the sensitivity of a firm’s stock price to monetary policy announcements. We show that the effect of economy-wide leverage is substantially larger than the effect of the firm’s own leverage. It is sufficient for the response of a firm’s stock price to strengthen that other firms in the economy become more leveraged. We further show that economy-wide leverage fluctuations explain the time-varying effects of monetary policy on stock prices. Our results are robust controlling for a variety of common business cycle variables and household leverage.