Back in 2008, Michael Burry’s bearish attitude and meticulous approach to analysis served him well, enabling the prominent investor to execute his famous ‘Big Short.’
In more recent years, characterized by a protracted and nearly unbroken bull market, Burry’s sometimes pessimistic outlook has not been as fruitful, as evidenced by his simple ‘sell’ recommendation made on the final day of January 2023.
On the day, the S&P 500, one of the most important benchmark indices of the American stock market, stood at approximately 4,076.60 points after a 1.5% daily rise.
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In contrast, the index closed at 5,745.37 points after the latest full trading session on Thursday, September 26. This means that between Michael Burry’s ‘sell’ recommendation and press time on September 27, the S&P 500 rose 40.94%.
Put into dollar values, a $1,000 investment made when ‘The Big Short’ investor recommended selling would have turned into $1,409.40, meaning that any investor who listened to Burry would have missed out on significant returns.
It is also interesting to note that the famous trader recognized the error only months later and tweeted in the spring of 2023 that he was wrong to recommend selling.
S&P 500 poised for more gains before the end of 2024
Not only has Burry’s 2023 recommendation not come to fruition, but some Wall Street experts believe that even now – when the S&P 500 is trading at all-time highs and is up 21.14% in the year-to-date (YTD) chart – there is significant upside ahead.
Brian Belski, the chief investment strategist of BMO, raised his year-end S&P 500 price target to 6,100 – the new Street high – on September 19.
Belski explained that the continuous strength of the stock market, paired with FED’s recent 50 basis points (BPS) interest rate cut, had convinced him to do more than make a simple incremental adjustment to his previous forecast.
Back in May, BMO also set an uncharacteristically high price target – uncharacteristically high at the time – and the most recent revision came after the S&P 500 climbed to the previous prediction.
If the index again rises to the target, it would mean it has climbed another 6.17% in the coming three months. Furthermore, if the S&P 500 rises to 6,100 by the end of 2024, its total annual increase would amount to approximately 28.62%, making this year the thirteenth-best since 1928.
What will happen to S&P 500 long-term?
Despite the generally bullish outlook and the optimism driven by the FED’s decision to loosen conditions for the first time since 2020, a protracted rally is not guaranteed for American stocks.
Funstrat’s Tom Lee, for example, believes that the final quarter of 2024 will indeed feature a major rally, but also considers that it is impossible to say with any certainty what will happen to U.S. stocks beyond the upcoming 3-6 months, per an interview from September 25.
Simultaneously, Lee warned that the upcoming CPI reports could spoil the uptrend as the latest interest rate reduction – and the associated market optimism – were driven by concerning employment figures and under the assumption that inflation is reliably coming down.
