Michael Burry Warns of Possible 1987-Style Stock Market Crash Despite Record U.S. Rally

Investor Michael Burry says the current U.S. stock market rally could end in a sharp correction similar to the 1987 crash.

Renowned investor Michael Burry, best known for predicting and profiting from the 2008 global financial crisis, has once again taken a bearish stance on the U.S. stock market, warning that the ongoing rally could end in a sharp correction similar to the infamous 1987 “Black Monday” crash. 

Burry, whose investment strategy inspired the Oscar-winning film The Big Short, said he still believes the market may be approaching a significant peak even as major U.S. stock indexes continue to post record highs.

“I continue to believe it is possible we are near a major top and possibly a 1987-type fall, but the S&P 500 making new highs likely will bring new money into the market.”

His latest warning comes as the S&P 500 recently climbed to fresh all-time highs, fueled by renewed optimism around artificial intelligence, easing inflation concerns and stronger-than-expected corporate earnings. The rally has also pushed investors back into equities after months of market uncertainty. 

Despite the bullish sentiment, Burry argues that rapid gains often attract inexperienced investors at the peak of a market cycle, creating conditions for an abrupt sell-off.

The investor has maintained several bearish positions against sectors he believes are significantly overvalued, particularly semiconductor and AI-related companies. Reports indicate he continues to hold short positions through put options linked to chip stocks while remaining skeptical of the sustainability of the artificial intelligence investment boom. 

Burry also expressed concern that today’s market is increasingly driven by automated trading strategies and volatility-linked investment funds, warning that these mechanisms could amplify losses if investor confidence suddenly weakens.

According to him, even a relatively modest decline in stock prices could trigger automated selling, leading to a cascade of liquidations similar to previous market crashes. 

The investor compared the current environment to previous periods preceding major corrections, including the dot-com bubble in 2000 and other historic market peaks where strong rallies were followed by sharp declines. 

However, not all market analysts share Burry’s pessimistic outlook.

Some economists argue that the current rally is supported by resilient corporate earnings, improving economic fundamentals and continued investor confidence, suggesting the present bull market differs significantly from previous speculative bubbles. 

Burry has built a reputation for making contrarian bets that often run against prevailing market sentiment. While some of his recent bearish predictions have taken longer to materialise, his successful call on the U.S. housing collapse before the 2008 financial crisis continues to make investors pay close attention whenever he issues fresh warnings. 

Whether his latest prediction proves accurate remains uncertain, but his comments have once again reignited debate over whether Wall Street’s latest rally is sustainable or nearing a dangerous turning point.