The election outcome that will make stocks plunge is not a Trump win

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Stocks will rally after Tuesday's election regardless of whether Hillary Clinton or Donald Trump wins, Tom Lee of Fundstrat says.

But one scenario Lee thinks would tank stocks would be Trump losing and refusing to accept defeat, he said in a note on Monday. Lee said the S&P 500 could fall 5% by the end of the year if that were to happen.

He assigned a 3% probability to Trump contesting the election result, compared with a 0% chance that Clinton would do so.

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Must-win states for Donald Trump
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Must-win states for Donald Trump

Florida

Republican presidential candidate Donald Trump pumps his fist in the air during a campaign rally at the Collier County Fairgrounds on October 23, 2016 in Naples, Florida. Early voting in Florida in the presidential election begins October 24. (Photo by Joe Raedle/Getty Images)

Ohio

US Republican presidential candidate Donald Trump speaks at a rally at The Champions Center Expo in Springfield, Ohio, on October 27, 2016. (Photo credit PAUL VERNON/AFP/Getty Images)

Iowa

Donald Trump, 2016 Republican presidential nominee, speaks during the 2nd annual Roast and Ride hosted by Senator Joni Ernst, a Republican from Iowa, not pictured, in Des Moines, Iowa, U.S., on Saturday, Aug. 27, 2016. Ernst, who in 2014 won the Senate seat vacated by Democrat Tom Harkin when he retired, has turned her Roast and Ride into the conservative answer to the Harkin's legendary Steak Fry fundraiser, which auditioned dozens of presidential candidates over its 37-year history. (Photo by Daniel Acker/Bloomberg via Getty Images)

North Carolina

Republican presidential candidate Donald Trump speaks to supporters at a rally on September 12, 2016 at U.S. Cellular Center in Asheville, North Carolina. Trump criticized Democratic rival Hillary Clinton for saying that half of his supporters belong in a 'basket of deplorables.' (Photo by Brian Blanco/Getty Images)

Nevada

Republican presidential candidate Donald Trump speaks during a campaign rally, Sunday, Oct. 30, 2016, in Las Vegas. (AP Photo/ Evan Vucci)

New Hampshire

Republican presidential candidate Donald Trump speaks during a town hall, Thursday, Oct. 6, 2016, in Sandown, N.H. (AP Photo/ Evan Vucci)

Colorado

Republican presidential candidate Donald Trump speaks to supporters during a campaign rally, Saturday, Oct. 29, 2016, in Golden, Colo. (AP Photo/ Brennan Linsley)

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Stock market trading over the past two weeks suggests that Clinton may be Wall Street's preferred candidate.

Since the FBI said on October 28 that it was going through additional emails linked to the private server Clinton used while she was secretary of state, a move that may have improved Trump's chances in the election, investors hedged their portfolios, and some sold stocks. Then on Monday, stocks jumped after the FBI's Sunday announcement that the bureau again found no reason to recommend that she be charged with criminal wrongdoing.

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New York Stock Exchange before the election
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New York Stock Exchange before the election
Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., November 7, 2016. REUTERS/Brendan McDermid
Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., November 7, 2016. REUTERS/Brendan McDermid
Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., November 7, 2016. REUTERS/Brendan McDermid
Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., November 7, 2016. REUTERS/Brendan McDermid
Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., November 3, 2016. REUTERS/Brendan McDermid
Pedestrians walk along Wall Street near the New York Stock Exchange (NYSE) in New York, U.S., on Monday, Oct. 31, 2016. U.S. stocks rose from a six-week low amid an increase in deal activity as traders assessed the outlook for the presidential election and interest rates in the world's largest economy. Photographer: Michael Nagle/Bloomberg via Getty Images
NEW YORK, NY - NOVEMBER 01: Traders work on the floor of the New York Stock Exchange (NYSE) on November 1, 2016 in New York City. As Wall Street continues to feel election uncertainty, the Dow Jones closes fell more than 100 points. (Photo by Spencer Platt/Getty Images)
Trader Tommy Kalikas works on the floor of the New York Stock Exchange, Wednesday, Nov. 2, 2016. Stocks are opening modestly lower on Wall Street as the market extends a pre-election losing streak. (AP Photo/Richard Drew)
A trader works on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Friday, Nov. 4, 2016. U.S. stocks fluctuated amid payrolls data that bolstered speculation the economy is strong enough to weather higher interest rates, while investors remained wary before the looming presidential election. Photographer: Michael Nagle/Bloomberg via Getty Images
Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Friday, Nov. 4, 2016. U.S. stocks fluctuated amid payrolls data that bolstered speculation the economy is strong enough to weather higher interest rates, while investors remained wary before the looming presidential election. Photographer: Michael Nagle/Bloomberg via Getty Images
NEW YORK, NY - NOVEMBER 01: Traders work on the floor of the New York Stock Exchange (NYSE) on November 1, 2016 in New York City. As Wall Street continues to feel election uncertainty, the Dow Jones closes fell more than 100 points. (Photo by Spencer Platt/Getty Images)
A trader works on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Monday, Oct. 31, 2016. U.S. stocks rose from a six-week low amid an increase in deal activity as traders assessed the outlook for the presidential election and interest rates in the world's largest economy. Photographer: Michael Nagle/Bloomberg via Getty Images
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Randy Frederick, the managing director of trading and derivatives at Charles Schwab, said there was a spike in options-market activity right after the FBI director, James Comey, announced renewed scrutiny of Clinton in his letter to Congress on October 28.

"Most people are prepared for a surprise," he told Business Insider on Friday.

"They're not expecting it, but I always say that as long as the odds of something happening are greater than zero, that means it could happen."

Trump's refusal to concede would is not unimaginable. Trump has repeatedly said the general election is rigged against him.

During the final presidential debate, Trump refused to promise he would accept the results, and he said he would look at the results when they are released. The following day, he said he would accept the results if he won.

Here's Lee's breakdown of all the election scenarios and how he thinks they could affect the stock market:Screen Shot 2016 11 07 at 10.39.42 AMAkin Oyedele/Business Insider

NOW WATCH: LIZ ANN SONDERS: The most unsettling outcome for the markets would be a surprise Trump win

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Markets

S&P 500 2,246.19 4.84 0.22%
DJIA 19,614.81 65.19 0.33%
NASDAQ 5,417.36 23.59 0.44%
DAX 11,179.42 192.73 1.75%
HANG SENG 22,746.86 -114.98 -0.50%
NIKKEI 225 18,954.29 188.82 1.01%
USD (per EUR) 1.06 0.00 -0.26%
USD (per CHF) 1.02 0.00 0.17%
JPY (per USD) 114.51 0.44 0.38%
GBP (per USD) 1.26 0.00 -0.04%

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