‘The Big Short’ Investor Michael Burry Warns: US Stocks Nearing Major Peak, Risk of 1987-Style Crash

According to CNBC, even as the S&P 500 continues to hit new all-time highs, Michael Burry — the investor made famous by the film 'The Big Short' — remains steadfast in his bearish stance, warning that this rally could ultimately culminate in a crash reminiscent of the 1987 stock market crash.

Burry wrote on Substack Tuesday (April 4) that 'I still believe the market may be approaching a major peak, and I don’t rule out a drop similar to 1987. However, the S&P 500’s continued rise to new highs is likely to attract more new capital into the market.'

On Tuesday, the S&P 500 surged 1.9%, closing at its highest level since June, marking its first record close in months. The rally was fueled by better-than-expected corporate earnings and declining oil prices, driven by market expectations that the Strait of Hormuz could soon reopen to shipping. The tech-heavy Nasdaq Composite jumped 2.7%, gaining nearly 5% over the first two trading days of the week.

Burry has been one of Wall Street’s most prominent skeptics of the AI investment frenzy. He argues that much of the current demand for AI infrastructure is built on various financing arrangements that may not be sustainable in the long term.

He notes that the market’s upward momentum is creating a self-reinforcing cycle: as volatility declines, systematic investors increase their market exposure.

'Remember, when markets rise amid falling volatility, volatility-targeting funds are forced to increase leverage, and other momentum-based strategies add further fuel to the fire,' Burry wrote.

Despite the ongoing rally in US equities, Burry says he still holds multiple short positions, including iShares Semiconductor ETF (SOXX-US), Micron (MU-US), Nvidia (NVDA-US), Caterpillar (CAT-US), Palantir (PLTR), Tesla (TSLA-US), and Applied Materials (AMAT-US).

The well-known investor expressed continued confidence in the long-term thesis behind these short bets. However, he emphasized that he would cut losses if market movements clearly contradict his outlook.

He revealed that, except for his short position on Nvidia, which remains unprofitable, all his other short positions are currently in the green.

In closing, Burry cautioned investors: 'Once again, shorting is not for everyone. I have to short, but most people should not do this.'