Byron Rollins/AP
President Harry S. Truman holds up an election day edition of the Chicago Daily Tribune, which, based on early results, mistakenly announced "Dewey Defeats Truman."
The S&P 500 has been "loosely tracking" odds that Hillary Clinton will win next Tuesday's election, according to Capital Economics' Andrew Hunter.
But stocks fell, and polls tightened in Donald Trump's favor, after news Friday of further FBI scrutiny into Clinton's emails while she was secretary of state.
This raises the possibility of a period of deadlock after the election, Hunter wrote in a note on Wednesday. And that won't be good for stocks.
The last time an election result caused real panic in the markets was in 1948.
As Hunter recalled, Republican Thomas Dewey consistently led in the polls in the weeks before the election. And because he was Wall Street's preferred candidate, stocks rallied.
However, incumbent President Harry Truman won the election, and Democrats took control of both the Senate and House of Representatives. The Chicago Daily Tribune accidentally published that Dewey defeated Truman.
The S&P 500 fell more than 10% in the following two weeks.
Capital Economics
"An additional complication this year is Trump's repeated claims that the election is "rigged" and his refusal to confirm that he will accept the results if he loses," Hunter said. "In the event of a very narrow Clinton win, it is all but guaranteed that Trump would aggressively dispute the election via the courts."
Investors, like many other Americans, are impatiently waiting for the suspense of the election to be over so that they can plan for the future with more certainty.
However, there may not be a repeat of the 1948 slump - or even any drop at all - if there's an election surprise next week. The lowest year-end forecast among strategists closely tracked by Bloomberg - 2,000, from Bank of America Merrill Lynch's Savita Subramanian - implies a 5% drop from current levels.