The S&P 500 closed at a record high on Tuesday, its first such close in 42 sessions, powered by strong earnings and falling oil prices. Michael Burry, the investor famed for predicting the housing market crash, warned the rally could still give way to a decline echoing 1987, even as he keeps short bets on Nvidia and several other stocks.
The S&P 500 closed at a record high on Tuesday, marking its first closing high in 42 sessions. Michael Burry, the investor famed for predicting the housing market crash and portrayed in "The Big Short," said the milestone could still give way to a sharp reversal similar to the one that struck markets in 1987.
Behind the move, the S&P 500 climbed 1.9% Tuesday as solid corporate earnings and declining oil prices lifted sentiment. The Nasdaq Composite gained 2.7% over the same session.
A rare four-day surge
Burry argued the rally carries a self-reinforcing risk. He said falling volatility forces vol-targeting funds to add leverage, pulling in momentum-driven buying that can reverse quickly if conditions shift. He cited BTIG's Jonathan Krinsky, who found the index has climbed 5% in four trading days to a new high only three other times in the past 30 years — on March 21, 2000, April 23, 1999, and Nov. 9, 2020.
Burry keeps his short bets
Burry is maintaining short positions in Nvidia, the iShares Semiconductor ETF, Micron, Caterpillar, Palantir, Tesla, and Applied Materials. He said every one of those bets remains profitable except his short against Nvidia. Still, he added that a decisive move against any trade would prompt him to close it out: "I must short. Most should not."
The 1987 comparison
The comparison points to Black Monday, when the Dow Jones Industrial Average shed 22.6% of its value in a single session on Oct. 19, 1987, a one-day loss unmatched in the index's history, according to Benzinga. Program trading, panic among investors, and thin liquidity were cited as contributing factors, according to Benzinga, and the rout quickly spread to international markets.
Not everyone accepts Burry's read. Kip Herriage, managing partner of Vertical Research Advisory, pushed back, saying Burry's short bets would suffer badly in what he called a bull market that could extend into the 2030s.
Sources: MarketWatch, Quartz
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