Michael Burry is keeping his bearish bets in place even as the S&P 500 hits a fresh record high. The "Big Short" investor warned the rally could still give way to a sharp reversal, while holding short positions against seven names.
Michael Burry is sticking with his bearish market bets even though the S&P 500 has climbed to a record high. Burry wrote in a Tuesday Substack post that "we are near a major top, and possible a 1987-type fall". He added that new index highs would likely draw fresh money into the market anyway.
S&P 500 and Nasdaq extend the rally
The S&P 500 jumped 1.9% Tuesday to its first record close since June, lifted by stronger-than-expected corporate earnings and another drop in oil prices. Hopes that the Strait of Hormuz could reopen to maritime traffic added to the gains. The Nasdaq Composite soared 2.7%, extending its gain over the first two days of the week to nearly 5%.
Short positions span seven names
Burry is doing this through short selling: he holds positions against the iShares Semiconductor ETF, Micron, Nvidia, Caterpillar, Palantir, Tesla and Applied Materials. He said he remains confident in his long-term view on those trades, though he would cut his losses if they move decisively against him. Every position remains profitable except his bet against Nvidia, he said.
Leverage and volatility feed the rally
Burry argues the rally is turning into a self-reinforcing cycle: falling volatility pushes systematic funds to add leverage, pulling in momentum strategies as well. He has also been one of Wall Street's vocal skeptics of the AI boom, arguing that demand for AI infrastructure is being fueled by financing arrangements that may prove unsustainable.
Most investors, he added, should avoid shorting altogether.
Source: CNBC
Trading involves risk.
Risk Disclaimer
