‘Big Short’ Investor Who Foresaw 2008 Recession Lays Out Predictions For 2023

Scion Asset Management founder Michael Burry, whose story was featured in “The Big Short” after he predicted the 2008 financial crisis, predicted that the new year will see a slowdown in inflation as well as a recession.

Economic volatility has persisted as a result of inflationary pressures, labor shortages, and backlogged supply chains, inducing negative growth in the first two quarters of last year. Policymakers at the Federal Reserve are currently pursuing the most aggressive campaign to suppress prices in decades as geopolitical pressures mount across the world.

Burry remarked on social media that year-over-year changes in the Consumer Price Index will continue to decline, possibly turning negative in the second half of the year. “Inflation peaked,” he said, “but it is not the last peak of this cycle.”

The former physician predicted that the United States will enter a recession by the end of the year, leading the Federal Reserve to cut target interest rates and prompting lawmakers to enact stimulus measures, in turn causing “another inflation spike.”

Burry garnered fame by betting against technology stocks during the dot-com bubble, earning 55% returns while the S&P 500 dropped 12%, according to a profile in Business Insider. He likewise shorted the housing market after evaluating bank balance sheets and subprime mortgage data, earning $100 million for himself and $700 million for his investors. The experience formed the basis of “The Big Short,” a book published by author Michael Lewis, which was later adapted into a movie in which actor Christian Bale starred as Burry.

The financier made headlines several months ago after he reduced his company’s stock holdings from $165 million to $3.3 million, selling all assets except for 500,000 shares of GEO Group, which invests in private prisons and mental health systems.

Economists generally foresee a recession striking the United States by the end of the year. Approximately 70% of economists surveyed by Bloomberg last month said that the economy would enter a prolonged retraction, predicting that gross domestic product would show flat readings in the first and third quarters and a 0.7% annualized decline in the second quarter. In a similar poll from the National Association for Business Economics, most respondents said recessionary risks have surpassed 50% amid slower growth and a lackluster labor market.

There exists no consensus on economic futures over the next several months. Bank of America Chief Investment Strategist Michael Hartnett said in a report that a recession will strike in the first half of the year before markets attain a “much more solid footing,” while an outlook from Goldman Sachs Chief Economist Jan Hatzius noted that analysts at the company believe the economy will “stick a soft landing” and entirely avoid a recession.

Last year marked the highest gas prices on record and one of the worst stock market performances in history. The S&P 500 index plummeted nearly 20% since the beginning of the year, rivaling the 37% decline seen in 2008 amid the collapse of the banking system, as well as the 12% and 22% declines witnessed in 2001 and 2002 amid the dot-com bubble.

The lackluster returns, which erased roughly one-quarter of equity from the typical American’s retirement account, occurred despite optimism at the beginning of last year from President Joe Biden, who boasted that the stock market was approximately 20% “higher than it was when my predecessor” was in office.

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