Meet Kevin: A New Damning Warning by Michael Burry
A new year tends to bring new predictions, particularly for the stock market and how individual asset classes will perform. Some are bullish, many are bearish in line with last year’s market performance.
A few predictions can get to the extreme. By looking at the reasoning and data behind extreme predictions, we can get a gauge as to the level of danger or opportunity. More importantly, looking at extreme predictions can help investors avoid worst-case scenarios.
Right now, investors Michael Burry sees the market as in an “everything bubble” that is now collapsing. That could mean markets are still overvalued. And that equity markets could still fall by another 50 percent.
The reason? Rising interest rates continue to slow the economy. Consumer spending showed a slowdown over the holiday season. And consumer savings, which spiked higher during the pandemic, now face a drawdown.
A slowdown can also be seen in Europe, which is dealing with significantly higher energy and utility prices. And China is slowing down as well, even as its official GDP data still shows mid-single-digit growth.
The issue likely won’t be resolved. Burry sees inflation coming down, but a recession causing a rapid change in interest rates lower and the addition of more government stimulus. As that happens, inflation will spike again, potentially leading to another spike higher. The trend could continue for years.