Stocks Headed for 40% Correction—Thanks, Trump Tax Cuts! – Dakota Free Press

South Dakota’s veteran investment officer Matt Clark usually brings good news. But at Thursday’s meeting of the South Dakota Retirement System Trustees, he said the state’s pension investments are flat so far this fiscal year:

State investment officer Matt Clark said the SDRS portfolio through the first five months of this fiscal year has earned “roughly around zero. So there is no return.”

Clark said stocks that SDRS owns out-performed last year and are running behind this year. Only about half of the SDRS portfolio currently is in equity investments. Asked to look ahead, he said, “Unfortunately, we can’t be optimistic at this time” [Bob Mercer, “As Investment Chief Sees Storm Clouds Ahead, SDRS Trustees OK a Record Cost-of-Living Hike,” KELO-TV, 2021.12.02].

Clark predicts the situation won’t improve in the near-term as the market must correct itself from over-valuation driven by the Trump tax cuts:

By his calculation, the U.S. stock market is at 166% of fair value and he expects the market will be hit at some point by a 40% loss. “The markets never stay overvalued forever.”

Clark said federal tax cuts helped keep Wall Street prices inflated, and now that Congress is spreading trillions in COVID-19 and infrastructure relief, inflation has reached Main Street and Walmart too [Mercer, 2021.12.02].

Note that spending on the pandemic was necessary to prevent a depression, while spending on infrastructure is necessary to sustain economic opportunity and growth. The tax cuts that John Thune, Mike Rounds, and Kristi Noem approved four years ago appear to have done nothing but pad fatcats’ pockets, increase the deficit, and drive a market bubble that Clark says is going to pop and depress pension returns for South Dakota’s public employees.

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