A contested election could mean more pain for the markets

Before you go, we thought you'd like these...
Before you go close icon

After a slugfest of a campaign, voters are likely happy that Election Day will bring the whole ugly spectacle to rest. Unless, of course, a Clinton win is contested by Donald Trump or his camp. Such a situation would have economists and investment pros, as well as voters, reaching for the antacid.

"Any time there's uncertainty, markets will react," said Lawrence J. White, an economics professor at New York University's Stern School of Business. Unlike previous business-friendly GOP candidates, Trump's hostility to globalism and his threats to reverse trade agreements have pushed companies into a holding pattern that has kept financial markets on edge.

Election day is today:

A Contested Result Will Slow Market Momentum

According to an analysis of quarterly conference call transcripts conducted by Reuters, executives from more than 80 companies have referenced the election as a challenge to their performance. To the extent that the grueling presidential campaign has had an impact on business, economists warn that a contested result could continue to act as a brake on the market's momentum.

"If this race turns out to be closer than what the polls are indicating right now, the chances of a contested election are high," said Peter Cardillo, chief market economist at First Standard Financial. "That means the saga of this election does not end tomorrow."

Marcus Noland, executive vice president and director of studies at the Peterson Institute for International Economics, said if the electoral votes were close and a key state like Florida came in with a razor-thin margin for Clinton, Trump could push for a recount. "You could end up back in 2000, but it could be much nastier," he said.

Even a contested election that ultimately ends in Clinton's favor could do longer-term damage, White said. "He very likely won't succeed, but just the possibility that he might, or that this might adversely affect Clinton's ability to get along with Congress her first session — those would be not favorable outcomes as far as the market is concerned," he said.

13 PHOTOS
New York Stock Exchange before the election
See Gallery
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
of
SEE ALL
BACK TO SLIDE
SHOW CAPTION +
HIDE CAPTION

Uncertainty Breeds Volatility

That's bad news for everything from equities to precious metals to currency, which have already been gyrating at the election's last-minute plot twists.

"What's really striking to me is how the market seems to be an inverse indicator of Trump's fortunes," Noland said. "With each twist and turn, the market is moving." After falling last week in the wake of the FBI's announcement that it was investigating additional Clinton emails, the agency's weekend announcement that it hadn't uncovered anything game-changing sent the markets back up on Monday.

Related: What Happens if Trump Loses and Won't Concede?

"If you're not able to remove uncertainty, that poses problems," said Andy Smith, senior vice president of financial planning at investment-planning firm Financial Engines. "It's more of the same kind of holding pattern until you get resolution."

The Long-Range Forecast

"That would be certainly damaging for hiring, for employers who are trying to forecast where their businesses will be not only in the short term over the next six months or so, but in the longer term," said John Challenger, CEO of executive outplacement firm Challenger, Gray & Christmas.

The longer it takes that resolution to come, the more lasting the effect on an economy whose current expansion might already be on borrowed time.

"When you've been in a long running cycle of economic upswing, there are fears that there's a recession on the horizon," Challenger said. "No one knows what that catalyst could be."

24 PHOTOS
Hillary Clinton and Donald Trump's final campaign days
See Gallery
Hillary Clinton and Donald Trump's final campaign days
U.S. Democratic presidential nominee Hillary Clinton acknowledges the crowd at a campaign rally in Cleveland, Ohio, U.S. November 6, 2016. REUTERS/Brian Snyder
Republican presidential nominee Donald Trump speaks during a campaign rally in Leesburg, Virginia, U.S. November 7, 2016. REUTERS/Carlo Allegri
U.S. Republican presidential nominee Donald Trump attends a campaign event in Wilmington, Ohio, U.S. November 4, 2016. REUTERS/Carlo Allegri 
U.S. Democratic presidential nominee Hillary Clinton speaks at a campaign rally in Detroit, Michigan, U.S., November 4, 2016. REUTERS/Lucas Jackson
Protest signs urging more civility in American politics flank a long row of signs supporting Republican President candidate Donald Trump in Hillsborough, North Carolina, U.S., November 4, 2016. REUTERS/Jonathan Drake 
A child dressed up as Republican presidential nominee Donald Trump waits at a campaign event in Hershey, Pennsylvania, U.S. November 4, 2016. REUTERS/Carlo Allegri
Republican presidential nominee Donald Trump attends a campaign event in Hershey, Pennsylvania, U.S. November 4, 2016. REUTERS/Carlo Allegri 
Jay Z and Beyonce share a kiss before Democratic U.S. presidential candidate Hillary Clinton speaks during a free campaign concert in Cleveland, Ohio, U.S., November 4 , 2016. REUTERS/Aaron Josefczyk 
Campaign Manager Kellyanne Conway speaks before Republican presidential nominee Donald Trump attends a campaign event in Hershey, Pennsylvania, U.S. November 4, 2016. REUTERS/Carlo Allegri
A cardboard cutout of Republican presidential nominee Donald Trump is pictured on a the media charter plane with a countdown clock to the election while sitting on the tarmac at the airport in Tampa, Florida, U.S. November 4, 2016. REUTERS/Carlo Allegri
U.S. President Barack Obama takes the stage to deliver remarks at a Hillary for America campaign event in support of Democratic presidential nominee Hillary Clinton in Charlotte, North Carolina, U.S. November 4, 2016. REUTERS/Jonathan Ernst 
U.S. President Barack Obama puffs out his cheeks at a baby as he greets people in the crowd after his remarks at a Hillary for America campaign event at the Fayetteville State University in Fayetteville, North Carolina, U.S. November 4, 2016. REUTERS/Jonathan Ernst
U.S. Democratic presidential nominee Hillary Clinton and businessman/NBA Dallas Mavericks owner Mark Cuban talk on her campaign plane in Moon, Pennsylvania, U.S. November 4, 2016. REUTERS/Brian Snyder
People listen as U.S. President Barack Obama delivers remarks at a Hillary for America campaign event at the Fayetteville State University in Fayetteville, North Carolina, U.S., November 4, 2016. REUTERS/Jonathan Ernst
Republican presidential nominee Donald Trump attends a campaign event in Atkinson, New Hampshire, U.S. November 4, 2016. REUTERS/Carlo Allegri
Ground crew wait with a set of bunting wrapped stairs for Republican presidential nominee Donald Trump to attend a campaign event in Wilmington, Ohio, U.S. November 4, 2016. REUTERS/Carlo Allegri
U.S. President Barack Obama greets people before delivering remarks at a Hillary for America campaign event at the Fayetteville State University in Fayetteville, North Carolina, U.S., November 4, 2016. REUTERS/Jonathan Ernst
Supporters pose with a large effigy of U.S. Republican presidential nominee, Donald Trump, while waiting to attend a campaign event with U.S. Democratic presidential nominee Hillary Clinton in Detroit, Michigan, U.S. November 4, 2016. REUTERS/Lucas Jackson
A Donald Trump supporter disrupts remarks by U.S. President Barack Obama at a Hillary for America campaign event at the Fayetteville State University in Fayetteville, North Carolina, U.S., November 4, 2016. REUTERS/Jonathan Ernst
U.S. Democratic presidential nominee Hillary Clinton greets audience members at a campaign rally at Heinz Field in Pittsburgh, Pennsylvania, U.S. November 4, 2016. REUTERS/Brian Snyder 
U.S. President Barack Obama takes the stage to deliver remarks at a Hillary for America campaign event at Fayetteville State University in Fayetteville, North Carolina, U.S., November 4, 2016. REUTERS/Jonathan Ernst
Republican presidential nominee Donald Trump attends a campaign event in Wilmington, Ohio, U.S. November 4, 2016. REUTERS/Carlo Allegri
U.S. Democratic presidential nominee Hillary Clinton walks through Heinz Field, home of the NFL's Pittsburgh Steelers, after a campaign rally in Pittsburgh, Pennsylvania, U.S. November 4, 2016. REUTERS/Brian Snyder
of
SEE ALL
BACK TO SLIDE
SHOW CAPTION +
HIDE CAPTION

Read Full Story

Markets

S&P 500 2,191.95 0.87 0.04%
DJIA 19,170.42 -21.51 -0.11%
NASDAQ 5,255.65 4.55 0.09%
DAX 10,513.35 -20.70 -0.20%
HANG SENG 22,599.60 34.78 0.15%
NIKKEI 225 18,332.03 -94.05 -0.51%
USD (per EUR) 1.06 0.00 -0.24%
USD (per CHF) 1.02 0.00 0.23%
JPY (per USD) 113.63 0.13 0.11%
GBP (per USD) 1.27 0.00 0.01%

From Our Partners