Investor and hedge fund manager Michael Burry predicted last summer that inflation in the US, which had notched up the highest level in 4 decades, would decline in a few months. Burry is known as a prophet of Wall Street. For instance, in the mid-2000s, he projected with pinpoint accuracy that the bubble in the US housing market would eventually blow up. Remarkably, his inflation forecast has also come true. Indeed, the annual CPI sharply slackened to 3% in June 2023 from 9.1% a year ago.
The well-known investor also cautioned against a looming crash in the US stock market and a recession in the US economy. These predictions have not been fulfilled yet.
Speaking of inflation, the CPI surged to 9.1% in June 2022. Before the inflation report was posted, Michael Burry tweeted that disinflation in consumer prices would be recorded at the year end. The US CPI eased to 6.5% on year in December 2022. Burry again came up with his forecasts in early 2023 insisting that headline inflation would loosen its grip later on. Amazingly, inflationary pressure ebbed away again with the CPI slipping to 4% on year in May 2023.
The successful investor warned about a historic bubble in the stock market that would eventually end up in an apocalyptic crash. In May 2022, he said that the S&P 500 could tumble below 1,900. In the meantime, despite an almost 20% slump last year, the benchmark stock index has recovered by 16% this year to 4,400.
His other prophecy concerns domestic consumption. Michael Burry expects American households suffering high inflation and credit burden to run out of all their savings by the end of this year. If this happens, consumer spending will shrink dramatically, thus eroding corporate earnings. In reality, consumer spending and employment in the US have been logging steady growth. Time will tell whether Michael Burry is the most reliable Wall Street analyst.
