Michael Burry says the stock market’s latest record high resembles the March 2000 dot-com bubble peak more than any other top in modern history.
In an Oct. 24 Substack post, Burry examined all 982 S&P 500 record closes since 1980. He scored each on seven measures of market internals, including the share of stocks near their highs and the share stuck in deep drawdowns.
- PYPL stock is moving after earnings. Get all the details and data here.
Two dates ranked at or beyond the 95th percentile of weakness on all seven: March 2000 and Oct. 6, 2026, the most recent record for the index tracked by the SPDR S&P 500 ETF (NYSE:SPY). No other record high in 46 years did. Burry says the pattern first appeared this year on May 27.
A Narrow Rally
Only 19.3% of S&P 500 members traded within 10% of their 10-year highs at the Oct. 6 record, a reading in the 99.5th percentile. Fewer than 100 stocks made up the leadership group, something seen only once before, in March 2000, when the Nasdaq-heavy names behind the Invesco QQQ Trust (NASDAQ:QQQ) went vertical.
Those leaders also look tired. Burry found 58% of them sat 5% to 10% below their peaks, the highest share on record. March 2000 came in second at 40%.
At the other end, 23% of index members are what Burry calls “Busted,” down more than 40% from their highs. The group sits a median 55% below its peaks.
Priced Like 2000
Using his adjusted earnings figures, Burry estimates the S&P 500 trades at about 32 times earnings. The 2000 market traded at roughly 32 to 34 times.
However, the two eras differ. The 10 largest companies traded at 50 times trailing earnings in 2000 against 33 times today. Busted stocks were far cheaper back then, however, with a median of 10.2 times earnings versus 17.2 times now.
See More:
Top Value Stocks
The 2000 Playbook
After the 2000 top, leaders posted a median 33% decline over 12 months and 50% over 18 months. Busted stocks rose a median 19% and 18% over the same stretches.
Burry cautions the pattern does not always hold. After the October 2007 peak, every group fell more than 40% over 18 months. Deep discounts offered little protection heading into the 2020 COVID crash either.
Still, he is positioned for a repeat. Burry holds beaten-down names such as Lululemon Athletica Inc. (NASDAQ:LULU), PayPal Holdings Inc. (NASDAQ:PYPL) and Adobe Inc. (NASDAQ:ADBE), set against short positions in AI and semiconductor stocks, a corner of the market tracked by funds like the VanEck Semiconductor ETF (NASDAQ:SMH).
Early returns lean his way. From Oct. 6 through Oct. 19, the 114 Busted stocks gained a median 3.2% while the S&P 500 fell 1.6%.
Burry called the move “almost certainly an indication of nothing.”
Image: Shutterstock
