“Lower rates of taxation will stimulate economic activity and so raise the levels of personal and corporate income as to yield within a few years an increased – not a reduced – flow of revenue to the Federal Government”

JFK – 01.17.63 – Annual Budget Message

 

It may be fair to say that John F. Kennedy (JFK) may represent the pinnacle for the Democratic Party. Donald Trump, some would say, represents the nadir of the Republican Party. But the youngest man elected to the US Presidency may have more in common with the oldest man elected to be President than devotees from either side may wish to admit.

 

Both were second sons of successful and domineering fathers. Both grew up in wealth and privilege, though outside the highest levels of social status. Both were rebellious in school, reckless and “cavalier” in relations with women, and both were hounded by critics, chastising their achievements who claim they were interested more in publicity, than actual achievements.

 

They were both unlikely Presidential candidates who won the White House after closely fought campaigns against opponents who had been on the political scene far longer than them.

 

They both led their parties with congressional majorities, but that were deeply divided.

 

Both raised eyebrows by appointing family members to senior positions.

 

And while some may disagree on this point, both Kennedy and Trump were pioneers in political communications. Kennedy with the television, Trump with his Tweets on social media.

 

Of course there were many obvious differences between the two as well:

• JFK has real experience in public affairs before he ran, Trump had none
• JFK could be self-deprecating with his excellent sense of honour and had an appreciation for history… DJT… well, not so much
• JFK seemed to learn from his early Presidential mistakes.
• And I could go on…

But two additional similarities between the two men? Tax cuts and markets tracking.

 

In 1963, Kennedy proposed a tax cut that slashed business and individual taxes by 30%. While it is true, tax rates were a lot higher than (as high as 90% in cases) than now. But the philosophy was the same: lower taxes will get businesses, individuals and consumers going again and stimulate a lackluster economy. We all know what President Trump did with taxes and how his critics are screaming about deficits. Would you readers believe that April 2018 set a record for US government revenues for the month of April? The first month of enactment of the tax reform!

 

Just as President Trump now is, President Kennedy was consumed with negotiation with Korea in April of 1962. Not with North Korea, however, but with South Korea and Japan. So maybe President Trump is not far off the mark in 2018, 56 years later, saying this should have been dealt with decades ago?

 

Finally, when doing research for this piece, I came across one more similarity, and one which impacts all readers: how closely markets (as measured by the S&P500) have tracked under the two presidents (so far):

 

 

As of the end of April 2018, President Trump had been in office 371 days, and yet only 60 basis points (0.60%) was the spread on the S&P 500 in terms of relative price performance.

 

Even more eerie is how they tracked on a TIMING basis. The Trump S&P had a swing high on Day 363 while Kennedy had a swing high on Day 364. Can’t get any closer tracked.

 

Observers of the chart will also notice that right about now for the next 40 days or so, things can get a little sloppy before resuming a solid uptrend. The JFK decline was 23% if anyone needs to know. Can’t say with any certainty the two will continue trading closely, but it is food for thought. We are overdue for a more pronounced correction.

 

Let’s see how it plays out…

 

Stay tuned,

 

Vito Finucci, B.COMM, CIM, FCSI

Vice President and Director, Portfolio Manager

 

 

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