Legendary “Big Short” investor Michael Burry issues an ominous warning after the latest stock market rally: “Sell.”
After a dismal 2022, the stock market had a blistering start to the year, with the S&P 500 soaring more than 6% in January and tech stocks having their best month since 2001. But Michael Burry, the hedge fund manager best known for predicting and profiting from the housing market crash of 2007 and 2008, predicts a dark turn.
“Sell,” he wrote in a one-word tweet on Tuesday, which has since been deleted. The missive came just hours before the Federal Reserve announced its latest interest rate decision and presided over Jerome Powell’s much-anticipated press conference.
While some market observers have argued a new bull market begins and many investors are betting that the worst of inflation is over, which will allow the Federal Reserve to slow or halt its interest rate hikes and boost stocks, Burry is not buying it.
The head of Scion Asset Management said since 2019 that the stock and bond markets are in bubble territory and ready to burst. He believes the rise of passive investing — a long-term buy-and-hold strategy that emphasizes steady flows into index funds and ETFs — is fueling a massive stock market overvaluation that will eventually by reversing. And when it does: “It will be ugly,” he warned.
In 2021, ahead of Crypto Winter and the 2022 bear market, Burry said the rise of passive investing and risky speculation would lead to “mother of all accidents” in crypto and stocks. And he followed through on his own advice to sell last year, cutting all but one of Scion Asset Management’s holdings. private prison stockthem GEO Groupin the second trimester.
Burry finally added five new smaller positions towards the end of last year, according to SEC Filingsbut the funder tweeted after the buys went public, investors have “no idea how short I am.” And in November, he said that even after stocks fell nearly 20%, the market was still an example of the “the biggest speculative bubble of all time in all things”, while predicting a “prolonged recession of several years” in the USA
Although Burry’s forecasts are more pessimistic than most, he’s not the only expert predicting a decline in stocks. Top Wall Street strategists, including Morgan Stanley’s chief investment officer Mike Wilson and Chief Equity Strategist of JPMorgan Chase Marko Kolanovic– are warning investors that the latest market rally is just another bear market trap, and some market watchers say an outright crash is ahead.
Jeremy Grantham, the legendary British investor who heads the asset management firm GMO, wrote in a Outlook letter 2023 published last week that stocks could fall further 50% this year like what he calls the “super bubble” just started to appear.
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