What could possibly go wrong for money managers in an election year already rocked by a worldwide pandemic, nearly seven months of economic shutdown, sometimes violent social justice riots and a volatile, but remarkably resilient stock market?

It’s not giant Asian murder hornets or a holographic alien invasion. It’s a contested presidential election. And money managers think the chances of such a tense, national showdown are good.

“I think it's a pretty high probability due to the fact that you're going to have a lot more mail-in ballots this year. I think that's definitely very likely,’ Frank Rybinski, chief macro strategist at Aegon Asset Management, said yesterday during a panel discussion hosted by media relations firm JConnelly.

“The market is really pricing in that there's going to be some more uncertainty [in November],” added Rybinski, who said he sees “implied volatility” already that may likely continue through the end of the year.

If there is one thing we know, the stock market doesn’t like uncertainty, and the more drawn out it is, the worse the results. The last time America experienced a contested election was in 2000, when the S&P 500 ended the year down 9.1% after six weeks when it was unclear who had won the presidential election. Vice President Al Gore disputed the Republican challenger George Bush’s victory in a race Gore first conceded and then challenged. The U.S. Supreme Court finally ruled Bush the winner on December 12. 

With poll after poll predicting the potential for an extremely close presidential race again in 2020, money managers are bracing for the same type of uncertain election results.

“We'd say about 50% [chance], because Pennsylvania looks like such a mess,” Troy Gayeski, Partner, co-CIO and senior portfolio manager at SkyBridge Capital, said during the discussion.

Pennsylvania is a critical swing state for the outcome of the presidential election. “There's ample evidence already that lawyers are descending on the state for pre-voting and the counting process ... it took about six weeks after the Bush-Gore election to settle it in the Supreme Court. There's a reasonable expectation that this [decision] would take at least six weeks this time, if not slightly longer,” said Gayeski, who is also a senior portfolio manager at SkyBridge.

It may, again, be settled in the Supreme Court, “which brings us back to why this appointment is very critical, not only because of the amplifying acrimony right now, but for potentially deciding the outcome, which only raises the stakes higher,” Gayeski said.

President Trump’s Supreme Court nominatee, Amy Coney Barrett, began meeting with GOP senators on Capital Hill yesterday in advance of Senate confirmation hearings, which are scheduled to begin Oct. 12 and are sure to be rancorous. A number of Democrat senators have already announced they won’t meet with Barrett, who was nominated by Trump to fill the vacancy left by Justice Ruth Bader Ginsburg’s passing. While GOP leadership says they have the votes needed to confirm Barrett, Trump said during the first presidential debate yesterday that he has until the end of the year to do so, even if he loses the election.

Sylvia Jablonski, managing director, Capital Markets – Institutional ETF Strategist at Direxion, said she doesn’t expect any stability in the market until “we know” who accepts the election results. She predicted that a contested race would “bring a ton of volatility back into the market.”

Jablonski said that while many of President Trump and Joe Biden’s proposals are not vastly different from the market’s perspective, “I think that counting the votes is going to be a bit of a disaster. We'll have to see if everybody plays like big boys and girls. Of course, you have taxes and different policy issues, but it's not like the right extreme and the left extreme here. I think just the outcome of actually accepting the results of the election will make a huge difference,” she added.