U.S. stock market braces for rocky week ahead of contentious U.S. election - Reuters

NEW YORK (Reuters) - Wall Street faces a rocky run-up to Election Day, with mounting worries about the outcome in Washington adding to nerves about the coronavirus pandemic and fading chances of stimulus.

Before Monday, investors appeared to be dialing back on election-related volatility bets on the expectation of a clean win.

Now market watchers worry that an unexpected victory by President Donald Trump, a Republican, or an uncertain election outcome could force drastic unwinding of positions similar to what occurred in 2016, when investors were overwhelmingly positioned for a Hillary Clinton presidency.

A surprise victory by Trump could lead to a post-election jump similar to that in 2016 here, when a rally in drugmakers and financial companies helped reverse deep overnight losses and pushed the S&P 500 up more than 1%, the start of a surge through the end of the year.

Morgan analysts said on Monday that the best outcome for equities is an “orderly” Trump victory, with the S&P 500 potentially catapulting to 3,900.

Signs of a close election tend to lead to more volatility in the run-up to Election Day, said King Lip, chief strategist at Baker Avenue Asset Management in San Francisco.