Categories
Audio Sources - Full Text Articles

‘Big Short’ investor Michael Burry predicts a US recession in 2023 and another inflation spike

Michael Burry big shortMichael Burry.

Jim Spellman/Getty Images

  • Michael Burry said he expects the US to slump into recession in 2023 and inflation to spike again.
  • The “Big Short” investor predicted inflation would decline overall in 2023 as the economy weakened.
  • The Fed and US government would respond with stimulatory policy, causing inflation to jump again, he said.

The US economy is poised to suffer a recession in 2023 as well as another inflation spike, Michael Burry has said.

The investor of “The Big Short” fame, known for his dire but often accurate predictions, issued the gloomy forecast in a tweet posted Sunday.

“Inflation peaked. But it is not the last peak of this cycle,” he said. “We are likely to see CPI lower, possibly negative in 2H 2023, and the US in recession by any definition.”

He added: “Fed will cut and government will stimulate. And we will have another inflation spike. It’s not hard.”

Inflation surged to a 40-year high of 9.1% in June and remained above 7% in November, well ahead of the US Federal Reserve’s 2% target. The central bank reacted by hiking its base interest rate from near-zero to more than 4% and has signaled it will peak above 5% in 2023.

Higher interest rates aim to dampen upward pressure on prices by discouraging spending, investing, and hiring. However, they can simultaneously erode corporate profits and sap economic growth, leading to declines in asset prices and ultimately, recession.

Burry’s view appears to be that inflation will cool and the economy will weaken in 2023, prompting the Fed to cut rates and the government to boost spending in an effort to spur growth — which, in turn, will drive up demand and prompt inflation to rise again.

The Scion Asset Management chief warned back in April 2020 that the post-pandemic reopening of the economy could spark higher inflation. He also flagged last year that American households were putting away less money each month, racking up debt, and were on track to virtually exhaust their savings by December — raising the prospect of a slump in consumer spending and a prolonged recession.

Burry is best known for his billion-dollar wager against the mid-2000s housing bubble, which was immortalized in the book and movie “The Big Short.” He also bet against Elon Musk’s Tesla and Cathie Wood’s flagship Ark Innovation fund last year, and inadvertently laid the groundwork for the meme-stock craze by investing in GameStop before the stock skyrocketed at the start of 2021.

Moreover, the Scion chief last summer sounded the alarm on the “greatest speculative bubble of all time in all things,” warning buyers of meme stocks and cryptocurrencies that they were barreling towards the “mother of all crashes.”

Here’s a screenshot of Burry’s latest tweet:

Michael Burry tweet

Twitter/@michaeljburry

Read more: A Michael Burry expert breaks down what makes the ‘Big Short’ investor special. He also revisits Burry’s iconic bet against the housing bubble, and his GameStop, Tesla, and Ark wagers.

Read the original article on Business Insider