S&P 500 Hits New Highs as Burry Warns of 1987-Style Crash Risk
N.R. Finch
The S&P 500 closed at its first record high in 42 trading days. Michael Burry immediately warned the market may be nearing a major top, citing 1987 Black Monday-style crash risk — this means → the bull-bear divide now centers on systemic leverage driven by low volatility.
What exactly is Burry warning about?
Burry posted on X: "I continue to believe we may be approaching a major top, and a 1987-style decline is possible."
On October 19, 1987 — Black Monday — the Dow plunged 22.6% in a single day, still its largest one-day drop ever.
This means → he is not comparing today to a slow bear market. He is comparing it to a single-day flash crash — the kind you cannot react to.
Why is low volatility actually dangerous?
Burry's core logic: when markets rise in a low-volatility environment, vol-targeting funds — funds that automatically adjust position size based on volatility — are forced to add leverage.
Momentum strategies — quantitative capital that chases rising prices — pile in alongside them. In plain terms = the calmer the rally, the more aggressively machines bet.
Once conditions reverse, these positions unwind fast, concentrating selling pressure. The VIX rose 4% Tuesday to 16.5, but had fallen 21% over the prior five sessions.
What is Burry actually betting on?
Short semiconductors: he holds put options and a short position on the iShares Semiconductor ETF (SOXX).
Short Nvidia and the Nasdaq 100: Nvidia puts rolled out to June 2027; Invesco QQQ short position rolled to February 2027.
He also exited Microsoft longs and calls, closed Oracle shorts, and closed Palantir puts while keeping the Palantir short. This reflects a narrowing of his battle lines — concentrating firepower on semis and broad-index shorts.
How rare is this kind of rally historically?
Burry cited research from BTIG strategist Jonathan Krinsky: the S&P 500 rising 5% in four trading days and hitting a record high has happened only three times in thirty years.
The first two were March 2000 (near the dot-com bubble top) and April 1999 (most internet stocks crashed afterward). The third was November 2020.
This means → two of the three preceded major declines, but one did not. History is not a certainty — but the probability distribution is not encouraging.
What do the critics say?
Vertical Research Advisory founder Kip Herriage fired back on X: "Burry's short positions will be completely destroyed by 2027."
His argument: this is a "generational bull market" that will surpass the dot-com era's gains and run into the 2030s.
Burry himself acknowledged in a May Substack post that he has "become a meme for repeatedly predicting crashes" — but listed successful calls in 2000, 2007, 2019, and the 2021 meme-stock collapse.
Low-volatility bull market — systemic risk or generational opportunity?
BULL
Rare breadth and strength
S&P hitting new highs with broadening participation — generational bull characteristics are clear.
Bears have been wrong before
Burry admits he became a meme — past crash calls were often early.
BEAR
Mechanical leverage buildup
Low volatility forces vol-targeting funds to add exposure — reversal concentrates selling pressure.
History tilts bearish
A 5% four-day rally to new highs: three times in 30 years, two followed by major declines.
In plain terms = both sides have real evidence. Bulls are betting on trend continuation; bears are betting on fragile leverage structure. The key variable is how long the low-volatility regime holds.
What to watch next?
Krinsky argues that the chip-stock rally is unlikely to last: investors trapped in July will become "opportunistic sellers" as prices approach resistance.
Burry rolled both his Nvidia and QQQ short expirations out to 2027. This reflects a bet not on a short-term pullback but on a structural decline.
In plain terms = in the near term, new S&P highs may keep attracting fresh capital. But Burry's thesis will be tested over the next 12 to 18 months — if low volatility breaks, his argument gets priced in fast.
Content is for reference only, not financial advice.