Michael Burry's shift of investments from the U.S. to Chinese tech stocks could mean a Fed rate cut is imminent

Michael Burry, famed for predicting the 2008 housing crash, has liquidated around $50 million in tech stocks. This includes major companies like Amazon, Alphabet, and Oracle.

These tech stocks constituted about 15% of Burry’s portfolio in 2023. The sell-off, conducted in the first quarter of 2024, suggests Burry’s concern over high valuations amidst rising inflation and a declining dollar.

Economic Outlook and Warning

• High Valuations: The tech sector has enjoyed impressive gains since early 2023, leading to price-to-earnings ratios at a 20-year high, reminiscent of the 2000 Dot-Com bubble.
• Economic Warning: Game of Trades has interpreted Burry’s tech sell-off as a major warning signal for the economy. The elevated valuations raise concerns about a potential market correction or recession.

The Federal Reserve may be about to cut interest rates

The reason behind Michael Burry's transfer of investment from the United States may be that the Federal Reserve is about to cut interest rates.

In order to seek a market with higher investment returns, he decided to transfer the investment market to China in advance.

Shift to Chinese Tech Firms

Burry has redirected his investments towards Chinese tech companies such as JD.com, Alibaba, and Baidu, now holding about $23 million in these firms.

The shift is driven by the significantly lower valuations of Chinese stocks compared to their US counterparts, which are at their lowest in over 15 years.

Broader Market Implications

Burry’s investment decisions reflect a cautious stance on the overvalued US tech market. The significant rallies in the US stock market, particularly in tech, have raised concerns among analysts about a potential downturn.

By focusing on the undervalued Chinese market, Burry is positioning himself to capitalize on the relative value and potential growth opportunities in these markets.

Conclusion

Michael Burry's recent adjustments to his stock portfolio underscore his strategic approach to navigating economic uncertainties. His substantial sell-off of US tech stocks and pivot to undervalued Chinese tech firms highlight his concerns about overvaluation in the US market and his search for better investment opportunities abroad. This move serves as a cautionary signal for investors about the current state of the tech sector and broader market conditions.