Aside from the coronavirus-fueled market meltdown earlier this year, the stock market has performed quite well during Donald Trump’s four years in office. It performed even better during the eight years that Joe Biden was vice president in the Obama administration. Since 1950, stocks have delivered solid gains on average regardless of which party’s candidate sits in the White House.
The truth is that neither the reelection of Trump nor the election of Biden will likely cause the stock market to plunge. But that doesn’t mean the possibility doesn’t exist for a major downturn on the horizon. Here’s the election scenario most likely to cause a stock market crash.
The most dreaded outcome of all
Wall Street absolutely abhors uncertainty. Therefore, the election outcome that would almost certainly cause stocks to sink is the one that gives the least amount of certainty for the U.S.
The obvious scenario is if there’s no clear winner in the presidential race. Investors definitely don’t want a repeat of 2000 where presidential election disputes ultimately had to be decided by the U.S. Supreme Court.
Believe it or not, though, there’s a potential way for things to shake out that would be even worse than the 2000 fiasco. Imagine that the results in at least one battleground state are in dispute — and the final vote including the disputed state(s) could cause a tie in the Electoral College.
If we really wanted to add to the chaos, throw in a situation where disputed results in one or more states also put the control of the U.S. Senate in question. With this level of political uncertainty, it’s easy to see how stocks could nose-dive.
Here’s how it could happen…
Full story at Fool.com