Is a JFK-Style Bull Market Ahead?

The dawn of the Clinton Era in Washington is frequently compared to the beginning of the Camelot days of John F. Kennedy 32 years ago--a wonderful period for Wall Street, at least early on.

In the economy, “Bill Clinton inherits some of the same positives that were at the feet of Jack Kennedy in 1960,” says Eric Miller, investment strategist for DLJ Securities in New York. “Inflation expectations were similarly low then, and there was ample slack in labor availability and production capacity and little in the way of commodity shortages.”

That kind of environment is great for stocks, because it allows the economy to grow without the threat of higher inflation or higher interest rates--the market’s twin nemeses.

And while Wall Street had misgivings about the young Jack Kennedy, they quickly passed: The Standard & Poor’s 500-stock index soared 26.3% in 1961, JFK’s first year in office.

But Michael Sherman, strategist at Shearson Lehman Bros., notes that Kennedy was elected in a recession year when the stock market was depressed. In contrast, while the economy in 1992 may have felt like recession, it wasn’t--and neither were stocks unduly depressed, Sherman adds.

More important, says DLJ’s Miller, is that Clinton faces a nightmare JFK could scarcely have imagined: A $4-trillion national debt, and “the almost out-of-control nature of government programs, (with) a large segment of the populace having grown dependent on the assistance of others.”

Nonetheless, the temptation to expect a great national revival from Clinton--complete with a Kennedy-style bull market--probably looms large with many investors, Sherman and Miller admit. But then, to paraphrase legendary stock-picker Warren Buffett: “If you could rely on history in investing, the richest people would be librarians.”