According to Charlie Bilello, Chief Market Strategist at Creative Planning, investors who opted to follow Michael Burry’s stock-market warnings would have been better off investing in the S&P 500 instead. Bilello pointed out that the S&P 500 consistently outperformed Burry’s advice, with an average 6-month annualized gain of 34% in the periods following a selection of Burry’s tweets from 2019 to 2023.
In a straightforward message, Bilello advised, “Don’t make changes in your portfolio based on a tweet.” His assertion was based on the fact that Burry, renowned for his early prediction of the 2008-2009 housing-market crash, had issued a series of grim warnings about impending stock-market crashes in recent years.
Burry’s influence in the financial world had grown significantly due to his prescient call on the housing-market bubble and his portrayal in the book and film, “The Big Short.” His warnings in the summer of 2021, describing the current market as the “greatest speculative bubble of all time,” and predicting a “mother of all crashes,” were particularly noteworthy. In February of the same year, he issued a stark warning with a single word: “Sell.”
Burry’s cautionary statements were seemingly intended to dissuade investors from becoming overly optimistic about the 2023 equity market rebound, driven by decreasing inflation, a booming tech sector, and the anticipation that the Federal Reserve might shift from raising interest rates to cutting them.
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Despite these warnings, U.S. stocks have remained largely positive throughout the year, defying not only Burry but also the bearish predictions of other experts like Morgan Stanley’s Mike Wilson and economist David Rosenberg. The S&P 500 index, for instance, has surged by more than 16% in 2023, largely due to investor enthusiasm surrounding artificial intelligence technologies. The successful launch of OpenAI’s ChatGPT led to increased investments in AI-focused stocks, including companies such as Nvidia, Apple, and Microsoft.
Nonetheless, Burry remained unconvinced by the ongoing market rally. He had been predicting an economic downturn since the first half of 2022, which prompted him to place a substantial bet with a notional value of $1.6 billion against the S&P 500 and Nasdaq-100 in the last quarter.
In conclusion, despite Michael Burry’s reputation as a financial visionary, recent data and market performance suggest that following his stock-market warnings may not have been the most profitable strategy for investors. Instead, a simple investment in the S&P 500 would have yielded substantial gains, emphasizing the importance of not making hasty portfolio decisions based solely on social media or tweet-based advice.
