Michael Burry, known from ‘The Big Short,’ is maintaining his bearish outlook despite the S&P 500’s recent record highs, warning of a potential 1987-style market crash. He points to unsustainable financing in the AI boom and market dynamics compelling leverage, while continuing to hold short positions against major tech and industrial stocks.
Michael Burry, the renowned investor famously depicted in 'The Big Short', is maintaining his bearish stance, even as the S&P 500 recently reached new all-time highs. Burry has issued a stark warning that the current market rally could culminate in a sharp downturn reminiscent of the 1987 stock market crash.
In a recent Substack post, Burry stated, "I continue to believe it is possible we are near a major top, and possible a 1987-type fall, but the S&P 500 making new highs likely will bring new money into the market." His comments come as the S&P 500 saw a 1.9% jump on Tuesday, marking its first record close since June, propelled by stronger-than-expected corporate earnings and a decline in oil prices amidst hopes for the Strait of Hormuz to reopen. The tech-heavy Nasdaq Composite also soared 2.7%, extending its weekly gains to nearly 5%.
Michael Burry attends "The Big Short" New York premiere at the Ziegfeld Theater in New York, Nov. 23, 2015.
Credit: Andrew Toth | Filmmagic | Getty Images
Burry has consistently expressed skepticism regarding the artificial intelligence boom, suggesting that the demand for AI infrastructure is propped up by financing mechanisms that may not be sustainable long-term. He also notes that the market's upward momentum creates a self-fulfilling prophecy, with decreasing volatility encouraging systematic investors to increase their exposure.
"Remember, the market going up on falling volatility forces vol-targeting funds to leverage up, and brings leverage from other momentum strategies into play," he explained.
Despite the market's rally, Burry continues to hold significant short positions against several key players and sectors. These include the iShares Semiconductor ETF (SOXX), Micron (MU), Nvidia (NVDA), Caterpillar (CAT), Palantir (PLTR), Tesla (TSLA), and Applied Materials (AMAT).
The investor remains confident in the long-term outlook for these positions, though he did acknowledge that he would exit trades if they moved decisively against him. Currently, all of his short positions are profitable, with the exception of his bet against Nvidia. Burry concluded his post with a cautionary note on the nature of shorting: "Again, shorting is not for everyone. I must short. Most should not."
