“Multiple compression” factors have caused the market’s steep decline in the first half of 2022, says Michael Burry, founder of hedge fund Scion Asset Management.
In the second half of the year, “earnings compression” will put further pressure on stocks, which are only halfway under water, Burry said in a tweet, Bloomberg reports.
“Adjusted for inflation, 2022 first half S&P 500 down 25-26%, and Nasdaq down 34-35%, Bitcoin down 64-65%. That was multiple compression. Next up, earnings compression. So, maybe halfway there,” tweeted Burry, played by Christian Bale in the movie “The Big Short.”
Burry recently warned that the glut of inventory at major retailers will cause a “bullwhip effect” that might prompt the Federal Reserve to temper its rate hikes and quantitative tightening.
In May, the hedge fund manager warned of a downturn along the lines of 2008’s Great Recession, tweeting: “As I said about 2008, it is like watching a plane crash. It hurts, it is not fun, and I'm not smiling.”
Burry first rose to fame when he predicted the mortgage-backed securities housing bubble of ’08.
Burry was a driving force behind the GameStop meme stock frenzy in 2021, prompting the Securities and Exchange Commission to subpoena him.
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